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Technology Stocks : Broadcom (BRCM)

BRCM 54.67

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Feb 9 4:00 PM EST

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To: Doug B. who wrote (2251)	7/12/1999 5:47:00 PM
From: SteveG	Read Replies (1) of 6531

BRCM: Potential Delay In DOCSIS 1.2 Standard Should Help Not Hurt BRCM CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research - Americas Paul J. Weinstein, CFA James Parmelee Monica Matyjaskiewicz BUY LARGE CAP Broadcom Corporation (BRCM) Potential Delay in DOCSIS 1.2 Standard Should Help Not Hurt Broadcom Recent indications from CableLabs suggest it would like to put the breaks on the DOCSIS 1.2 implementation of the standard (scheduled for H2:00). This is apparently a response to customer/vendor complaints of too rapid a migration from 1. 0 (a year old) to 1.1(issued 4/99). While both Broadcom (BRCM) and Terayon (TERN) were contributors of intellectual property to 1.2 (BRCM with its advanced phy and TERN with its S-CDMA solution), the back- burning of 1.2 favors BRCM as it has dominance in the 1.1 implementation and had little to gain from the acceptance of 1.2. The differences in the DOCSIS version are; 1.0 = interoperability on an open platform; 1.1 = voice features; and 1.2 = more efficient upstream transmission. The value for the customers is in version 1.0 and 1.1 not 1.2. Our contacts in the industry and at BRCM confirm that 1.2 is likely to slip, and TERNs recent demonstration of its own DOCSIS 1.0 headend and modem, suggest it is anticipating a slow migration to 1.2. The 1.2 delay should aid the 1.1 take up rate, favoring BRCM. We remain constructive on the rollout of cable modems (10 vendors now approved for MCNS DOCSIS 1.0) and as primary silicon supplier (10-15% of sales) believe BRCM is a significant beneficiary. Price Target Mkt.Value 52-Week 07/08/991 (12mo.) Div. Yield (MM) Price Range USD 138.81 125+ $0 None $15,080.3 145-23 Annual Prev. Abs. Rel. EV/ EBITDA/ EPS EPS P/E P/E EBITDA Share 12/00E $1.00 138.8X 457% 12/99E 0.62 223.9 689% 12/98A 0.39 355.9 959% March June Sept. Dec. FY End 2000E $0.22 $0.24 $0.26 $0.28 Dec. 1999E 0.14A 0.15 0.16 0.17 1998A 0.09 0.08 0.08 0.13 ROIC (3/99) NA Total Debt (3/99) $0.00 Book Value/Share (3/99) $2.56 WACC (3/99) NA Debt/Total Capital (3/99) 0% Common Shares 108.64 EP Trend2 NA Est. 5-Yr EPS Growth 50% Est. 5-Yr. Div. Growth NM 1On 07/08/99 DJIA closed at 11,127 and S&P 500 at 1397.5. 2Economic profit trend.

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