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EXHIBIT 99.2
NEWS RELEASE
Media Contacts: Financial Analyst
Corporate Communications William J. Ruehle
Bill Blanning or Eileen Algaze Vice President and Chief Financial Officer
949-450-8700 949-450-8700
[email protected] [email protected]
[email protected]
BROADCOM REPORTS RECORD THIRD QUARTER REVENUE AND PROFIT
IRVINE, Calif. - October 18, 2000 - Broadcom Corporation (Nasdaq: BRCM) today
reported record revenue and profit for its third fiscal quarter, ended September
30, 2000.
Revenue for the third quarter was a record $319.2 million, an increase of 128.7%
over the $139.6 million reported in the third quarter of 1999 and an increase of
30.2% over the $245.2 million reported in the second quarter of 2000. Pro forma
net income was a record $78.7 million, or $.30 per share (diluted). This
compares with pro forma net income of $28.7 million, or $.12 per share
(diluted), for the same quarter in 1999 and with pro forma net income of $61.1
million, or $.24 per share (diluted), in the second quarter of 2000. Diluted
earnings per share for the quarter were based on 264.8 million weighted average
shares outstanding, compared to 238.3 million weighted average shares
outstanding in the third quarter of 1999 and to 253.9 million weighted average
shares outstanding in the second quarter of 2000.
Pro forma net income excludes the effects of acquisition-related expenses and
payroll taxes on certain stock option exercises. Including these charges, net
loss for the third quarter was $19.4 million, or $.09 per share, compared with
net income of $24.6 million, or $.10 per share (diluted), in the same quarter in
1999, and with net income of $55.9 million, or $.22 per share (diluted), in the
second quarter of 2000.
During the third quarter, Broadcom announced three key acquisitions - Altima
Communications, Inc., Silicon Spice Inc. and NewPort Communications, Inc. - and
closed a fourth acquisition, Innovent Systems, Inc., first announced in June.
The Altima transaction also closed within the quarter. All four acquisitions
will be accounted for under the purchase method of accounting.
"The 30 percent sequential revenue increase we experienced this quarter was the
result of continued strong momentum in the broadband markets we serve," said Dr.
Henry T. Nicholas III, President and CEO of Broadcom Corporation. "We saw brisk
demand across our business lines, from set-top boxes and cable modems to
enterprise networking equipment."
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"This across-the-board demand underscored a trend that we are helping to drive:
the rapid convergence of broadband technologies and markets," Nicholas said. "A
good example of this was our introduction during the quarter of a groundbreaking
single-chip cable modem solution that brings together a range of capabilities,
including those for set-top boxes, cable modems, home networking, Voice over
Internet Protocol and Ethernet connectivity. This product, the BCM3352, allows
cable operators worldwide to provide residential gateways capable of delivering
four lines of primary line digital telephone, IP video, home networking and
`always on' cable modem Internet services over cable systems and home phone
lines."
During the quarter, Broadcom significantly expanded its wide area networking
(WAN) offerings, announcing the acquisitions of NewPort Communications and
Silicon Spice. At the recent Networld+Interop industry trade show, Broadcom
demonstrated NewPort's 2.5 Gigabit per second (Gbps) OC-48 and 10 Gbps OC-192
SONET transceivers. Together these products have garnered 37 design wins with
leading networking OEMs. The company also demonstrated Silicon Spice's
reconfigurable communications processor, showing superior Voice over IP (VoIP)
capabilities when paired with both Broadcom's internally-developed technology
and telephony software gained last year in the acquisition of HotHaus
Technologies. The Silicon Spice and NewPort Communications acquisitions closed
in early October. On October 17, Broadcom further extended its portfolio of WAN
products, technologies and expertise, announcing the acquisition of Allayer
Communications, a leading developer of high-performance enterprise and optical
networking communications chips. Allayer's switch technology supports both 1
Gigabit and 10 Gigabit-per-second Ethernet speeds, and serves as the
metropolitan area network (MAN) intersection between access (IP-based) networks
and transport (SONET-based) networks.
In enterprise networking, Broadcom made a number of significant announcements
during the quarter, including the introduction of its third generation Gigabit
Ethernet over copper transceiver, a product which integrates two 10/100/1000
ports on a single chip. Broadcom is the dominant market leader in Gigabit
Ethernet over copper, with nearly a million ports of transceivers shipped. This
leadership position was further bolstered by the announcement in July that Apple
Computer will use Broadcom's Gigabit Ethernet transceiver as a standard part on
all of the computer maker's new dual-processor PowerMac G4 systems.
Additionally in the networking area, Broadcom demonstrated the world's fastest
e-Commerce security processor, another example of fruits of an earlier
acquisition (BlueSteel Networks).
To better serve the small and medium-sized business networking market, Broadcom
acquired Altima Communications, which focuses on small business 10/100 Ethernet
switches, repeaters and transceivers. These products are designed and optimized
for the cost-sensitive, value-oriented customer, with an emphasis on low power
consumption, small OEM product footprint, and low total system cost. In this
market segment, Broadcom also delivered new 5-port and 8-port expandable 10/100
ROBOswitch-plus family of Ethernet Switch-on-a-Chip products.
On October 4, Broadcom announced the acquisition of Element 14, Inc., a leading
developer of high port density, low power DSL chipsets. U.K.-based Element 14 is
developing what is anticipated to be the industry's first 12-port, full-rate
ADSL solution for the central office (CO). The acquisition is expected to close
in the current quarter.
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"We believe that the combination of Broadcom's existing leadership position in
VDSL with Element 14's ADSL capabilities will provide our markets with the most
comprehensive product portfolio available for copper twisted pair broadband
delivery," Nicholas concluded.
Broadcom's restated historical consolidated financial statements for 1999,
reflecting the effects of the four pooling-of-interest acquisitions completed in
2000 to date, were reported on a Form 8-K/A filed with the Securities and
Exchange Commission on July 10, 2000. Broadcom's unaudited pro forma combined
financial statements including the effects of the Innovent Systems acquisition
were reported on a Form 8-K/A filed with the SEC on October 2, 2000.
ABOUT BROADCOM
Broadcom Corporation is the leading provider of highly integrated silicon
solutions that enable broadband digital transmission of voice, video, and data.
Using proprietary technologies and advanced design methodologies, the company
designs, develops and supplies integrated circuits for a number of the most
significant broadband communications markets, including the markets for cable
set-top boxes, cable modems, high-speed local, metropolitan and wide area
networks, home networking, Voice over Internet Protocol (VoIP), carrier access,
residential broadband gateways, direct broadcast satellite and terrestrial
digital broadcast, optical networking, digital subscriber lines (xDSL) and
wireless communications. Broadcom is headquartered in Irvine, Calif., and can be
contacted at 949-450-8700 or at www.broadcom.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
This release may contain forward-looking statements based on our current
expectations, estimates and projections about our industry, management's
beliefs, and certain assumptions made by us. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will"
and variations of these words or similar expressions are intended to identify
forward-looking statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, our actual results could differ materially and adversely
from those expressed in any forward-looking statements as a result of various
factors.
Important factors that may cause such a difference for Broadcom include, but are
not limited to, the volume of our product sales and pricing concessions on
volume sales; the timing, rescheduling or cancellation of significant customer
orders; the loss of a key customer; the qualification, availability and pricing
of competing products and technologies and the resulting effects on sales and
pricing of our products; silicon wafer pricing and the availability of foundry
and assembly capacity and raw materials; our ability to specify, develop or
acquire, complete, introduce, market and transition to volume production new
products and technologies in a timely manner; the timing of customer-industry
qualification and certification of our products and the risks of
non-qualification or non-certification; the rate at which our present and future
customers and end-users adopt Broadcom's technologies and products in the
markets for cable set-top boxes, cable modems, high-speed local, metropolitan
and wide area networks, home networking, VoIP, carrier access, residential
broadband gateways, direct broadcast satellite and terrestrial digital
broadcast, optical networking, xDSL and wireless communications; delays in the
adoption
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and acceptance of industry standards in the foregoing markets; the risks
inherent in our acquisitions of technologies and businesses, including the
timing and successful completion of technology and product development through
volume production, integration issues, costs and unanticipated expenditures,
changing relationships with customers, suppliers and strategic partners,
potential contractual, intellectual property or employment issues, accounting
treatment and charges, and the risks that the acquisition cannot be completed
successfully or that anticipated benefits are not realized; intellectual
property disputes and customer indemnification claims; fluctuations in the
manufacturing yields of our third party semiconductor foundries and other
problems or delays in the fabrication, assembly, testing or delivery of our
products; the risks of producing products with new suppliers and at new
fabrication and assembly facilities; problems or delays that we may face in
shifting our products to smaller geometry process technologies and in achieving
higher levels of design integration; the effectiveness of our product cost
reduction efforts; the effects of new and emerging technologies; the risks and
uncertainties associated with our international operations; our ability to
retain and hire key executives, technical personnel and other employees in the
numbers, with the capabilities, and at the compensation levels needed to
implement our business and product plans; changes in our product or customer
mix; the quality of our products and any remediation costs; the effects of
natural disasters and other events beyond our control; the level of orders
received that can be shipped in a fiscal quarter; potential business
disruptions, claims, expenses and other difficulties resulting from residual
"Year 2000" problems in computer-based systems used by us, our suppliers or our
customers; general economic conditions and specific conditions in the markets we
address; and other factors.
Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form
10-Q, recent Current Reports on Forms 8-K and 8-K/A, and other Securities and
Exchange Commission filings discuss some of the important risk factors that may
affect our business, results of operations and financial condition. We undertake
no obligation to revise or update publicly any forward-looking statements for
any reason.
Broadcom(R) and the pulse logo are trademarks of Broadcom Corporation and/or its
affiliates in the United States and certain other countries. All other
trademarks mentioned are the property of their respective owners.
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BROADCOM CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $319,155 $139,561 $755,923 $359,227
Cost of revenue 135,359 56,261 316,496 145,162
-------- -------- -------- --------
Gross profit 183,796 83,300 439,427 214,065
Operating expense:
Research and development 62,502 30,234 153,990 82,560
Selling, general and administrative 27,817 14,610 67,545 42,175
-------- -------- -------- --------
Income from operations 93,477 38,456 217,892 89,330
Interest and other income, net 4,934 2,156 12,984 5,869
-------- -------- -------- --------
Income before income taxes 98,411 40,612 230,876 95,199
Provision for income taxes 19,682 11,904 46,175 27,131
-------- -------- -------- --------
Pro forma net income $ 78,729 $ 28,708 $184,701 $ 68,068
======== ======== ======== ========
Pro forma basic earnings per share $ .36 $ .14 $ .86 $ .34
======== ======== ======== ========
Pro forma diluted earnings per share $ .30 $ .12 $ .72 $ .29
======== ======== ======== ========
Weighted average shares (basic) 220,510 203,756 215,444 199,660
======== ======== ======== ========
Weighted average shares (diluted) 264,812 238,333 257,111 232,469
======== ======== ======== ========
</TABLE>
PRO FORMA ONLY
The above pro forma statements are based upon our unaudited consolidated
statements of operations for the periods shown, with certain adjustments. The
pro forma statements for the three months ended September 30, 2000 have been
adjusted to eliminate $45.7 million of in-process research and development
expense; $8.3 million of payroll tax expense on certain stock option exercises;
$27.6 million of stock-based compensation expense related to mergers and
acquisitions ("M&A"); and $24.9 million of amortization of goodwill and
purchased intangibles related to M&A; and reflect a pro forma effective tax rate
of 20%.
The pro forma statements for the three months ended September 30, 1999 have been
adjusted to eliminate $.7 million of payroll tax expense on certain stock option
exercises; $1.0 million of stock-based compensation expense; and $4.1 million of
merger-related expense; and reflect a pro forma effective tax rate of 29.3%.
The pro forma statements for the nine months ended September 30, 2000 have been
adjusted to eliminate $45.7 million of in-process research and development
expense; $14.8 million of payroll tax expense on certain stock option exercises;
$30.7 million of stock-based compensation expense related to M&A; $24.9 million
of amortization of goodwill and purchased intangibles related to M&A; and $4.7
million of merger-related expense; and reflect a pro forma effective tax rate of
20%.
The pro forma statements for the nine months ended September 30, 1999 have been
adjusted to eliminate $2.9 million of payroll tax expense on certain stock
option exercises; $2.8 million of stock-based compensation expense; $15.2
million of merger-related expense; and $17.0 million of litigation settlement
costs; and reflect a pro forma effective tax rate of 28.5%.
All historical financial information has been restated to give retroactive
effect to acquisitions accounted for using the pooling-of-interests method.
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BROADCOM CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- -------------------
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 319,155 $139,561 $755,923 $359,227
Cost of revenue(1)(2) 135,908 56,308 317,430 145,316
--------- -------- -------- --------
Gross profit 183,247 83,253 438,493 213,911
Operating expense:
Research and development(1)(2) 67,945 30,635 163,350 84,295
Selling, general and administrative(1)(2) 30,148 14,869 72,097 43,211
Stock-based compensation 27,615 959 30,655 2,816
Amortization of goodwill and
purchased intangible assets 24,936 -- 24,936 --
In-process research and development 45,660 -- 45,660 --
Merger-related costs -- 4,088 4,745 15,210
Litigation settlement costs -- -- -- 17,036
--------- -------- -------- --------
Income (loss) from operations (13,057) 32,702 97,050 51,343
Interest and other income, net 4,934 2,156 12,984 5,869
--------- -------- -------- --------
Income (loss) before income taxes (8,123) 34,858 110,034 57,212
Provision for income taxes 11,241 10,264 34,872 17,730
--------- -------- -------- --------
Net income (loss) $ (19,364) $ 24,594 $ 75,162 $ 39,482
========= ======== ======== ========
Basic earnings (loss) per share $ (.09) $ .12 $ .35 $ .20
========= ======== ======== ========
Diluted earnings (loss) per share $ (.09) $ .10 $ .29 $ .17
========= ======== ======== ========
Weighted average shares (basic) 220,510 203,756 215,444 199,660
========= ======== ======== ========
Weighted average shares (diluted) 220,510 238,333 257,111 232,469
========= ======== ======== ========
</TABLE>
NOTES
All historical financial information has been restated to give retroactive
effect to acquisitions accounted for using the pooling-of-interests method.
(1) Excludes stock-based compensation expense as follows:
<TABLE>
<S> <C> <C> <C> <C>
Cost of revenue $ 615 $ 37 $ 690 $ 112
Research and development 20,636 659 22,789 1,879
Selling, general and administrative 6,364 263 7,176 825
------- ------- ------- ------
$27,615 $ 959 $30,655 $2,816
======= ======= ======= ======
</TABLE>
(2) Includes employer payroll tax expense on stock option exercises as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Cost of revenue $ 549 $ 47 $ 934 $ 154
Research and development 5,443 401 9,360 1,735
Selling, general and administrative 2,331 259 4,552 1,036
------ ------- ------- ------
$8,323 $ 707 $14,846 $2,925
====== ======= ======= ======
</TABLE>
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BROADCOM CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 377,813 $180,816
Short-term investments 104,570 90,059
Accounts receivable, net 152,484 92,124
Inventory 44,471 19,177
Deferred taxes 8,980 8,380
Other current assets 25,807 12,950
---------- --------
Total current assets 714,125 403,506
Property and equipment, net 85,961 51,151
Long-term investments -- 9,351
Deferred taxes 293,766 137,779
Goodwill and purchased intangible assets, net 1,354,419 --
Other assets 24,963 7,966
---------- --------
Total assets $2,473,234 $609,753
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 92,818 $ 46,458
Accrued liabilities 68,405 41,561
Current portion of long-term debt 1,152 1,787
---------- --------
Total current liabilities 162,375 89,806
Long-term debt, less current portion 702 3,075
Shareholders' equity 2,310,157 516,872
---------- --------
Total liabilities and shareholders' equity $2,473,234 $609,753
========== ========
</TABLE>
All historical financial information has been restated to give retroactive
effect to acquisitions accounted for using the pooling-of-interests method.
