Broadcom makes beeline for Beceem

WiMAX technology may not exactly be the buzz word of the quarter, but Broadcom Corp. doesn’t like to kick a good chip when it’s down and has made a beeline for private fabless WiMax chip startup Beceem Communications Inc., bidding $316 million to buy the firm. The boards of directors of both firms have approved the merger.
Broadcom, like every other player in the wireless chip space, is plowing ahead with its 4G strategy, and believes buying Beceem will do much to catalyze its efforts in next-generation wireless silicon.
Despite the fact LTE seems to have won the hearts and minds of carriers worldwide, actual physical rollouts of the technology have only just begun, with around 132 operators in 56 countries invested in it. Meanwhile, WiMAX is already deployed in more than 550 networks in 148 countries, according to figures from the Global Semiconductor Alliance.
Still, WiMAX’s prospects are slipping, with staunch supporter ClearwireCorp. even talking LTE. Beceem recently announced it would be making LTE chips too, despite primarily being a WiMAX chip house. This makes it an attractive and rather inexpensive target for the likes of Broadcom, which wants to be a major player across the board and widen its RF portfolio.
“It is unclear whether Beceem could have made it stand alone. It is much better to be part of a larger, more complete portfolio of products that Broadcom offers, including 3G capability,” analyst Jack Gold told RCR Unplugged on Wednesday.
“Beceem is working on LTE and LTE is something that Broadcom needs to build on its 3G chip portfolio,” added Will Strauss of Forward Concepts, noting that in addition, Broadcom would get some expertise that’s hard to come by.
Roger Kay of Endpoint Technologies says Broadcom was also likely attracted by Beceem’s strong India focus, and the firm’s team of talented engineers based both in India and in the United States.
Broadcom said it expected to pay around $316 million for all Beceem’s outstanding shares of capital stock and other equity rights. That money will be paid in cash, except the for unvested Beeceem employee stock options, which will be paid in Broadcom stock options.
“This is a small firm with limited resources and it likely would have quickly become overcome by larger firms who have stronger existing relationships and deeper product portfolios,” said analyst Rob Enderle of the Enderle Group, explaining the low acquisition price.
Broadcom, he said, had the relationships it needed and without the merger Beceem’s future would have been questionable.
“This is also a market that is really focused on buying responsibly, or in other words it is a buyer’s market, and the combination resulted in what appears to be a reasonable – though fair – price, positioning Broadcom better in the emerging 4G marketplace.”
Indeed, several U.S. carriers are on the verge of rolling out their first LTE networks, with Verizon Wireless laying out its 4G strategies last week at CTIA’s fall show.
Broadcom says it doesn’t expect any impact on earnings from the acquisition, which it says should be neutral to earnings in 2011.
The transaction is expected to go through by the end of March.