[Broadcom to Acquire Digital Furnace Corporation, Providing Solution to Triple Upstream Capacity of Broadband Cable Networks]
IRVINE, Calif. and ATLANTA, Ga.--(BUSINESS WIRE)--Feb. 28, 2000--
Broadcom's combined silicon and software solution will reduce the systems cost for integration of voice and data into the existing cable network
Broadcom Corporation (NASDAQ:BRCM), the leading provider of integrated circuits enabling high-speed broadband communications to and throughout the home and business, today announced that it is acquiring Digital Furnace Corporation, an Atlanta-based developer of communications algorithms and software that significantly increase the capacity of existing broadband networks for interactive services.
The core technology of Digital Furnace, Propane(TM), is a patent-pending software solution that runs on Broadcom's Data Over Cable Service Interface Specification (DOCSIS) chipsets. Fully compatible with DOCSIS standards, Propane uses sophisticated algorithms to improve efficiency and reduce latency in broadband networks, providing as much as three times greater upstream capacity for interactive services.
Broadband cable operators are moving aggressively to introduce services to the fast-growing Internet access and telephony markets. According to Forrester Research, Inc., 26 million households will have Internet access via cable modems by 2005, and 20 per cent of U.S. households will have telephone service via cable-connected phones. These interactive services require cable operators to maximize efficiency of their reverse-path capacity, from the subscriber to the network. Propane provides the cable operators with a tool that can increase this reverse-path capacity up to three times, depending on cable plant and market variables. This allows them to provide new interactive services cost-effectively with available upstream bandwidth.
"The Digital Furnace(TM) software will turbo-charge Broadcom's cable-modem technology, optimizing the full capabilities of our chipsets," said Dr. Henry T. Nicholas III, President and CEO of Broadcom. "We can offer our cable modem customers superior and wider performance capabilities, allowing them to differentiate themselves in the expanding residential and business markets."
"We're excited about combining our technology with Broadcom's chips to help speed delivery of new voice, video and data services," said John Lappington, CEO, President and co-founder of Digital Furnace. "High-speed Internet access, multiple telephony lines, computer networking, security and video conferencing all create higher and higher demand for network capacity. With the added capacity provided by Propane, cable operators deploying Broadcom-based communications equipment can now greatly increase their number of interactive customers and resulting service revenue over existing broadband networks."
In connection with the acquisition, which is expected to close shortly, Broadcom will issue an aggregate of approximately 664,735 shares of its Class B Common Stock and reserve approximately 85,265 additional shares of its Class B Common Stock for issuance upon exercise of outstanding employee stock options and other rights of Digital Furnace. The share issuances are expected to be exempt from registration pursuant to section 3(a)(10) of the Securities Act of 1933, as amended. A portion of the shares issued will be held in escrow pursuant to the terms of the respective acquisition agreements, as well as various employee share repurchase agreements. (Share numbers shown reflect Broadcom's recent 2-for-1 stock split.)
The merger transaction will be accounted for as a pooling of interests. Broadcom's financial reports for the first fiscal quarter of 2000 (ending March 31) and prior periods will reflect the effects of the acquisition. The company expects to record a one-time charge in the first quarter to cover related expenses.
The boards of directors of both companies have approved the merger, which awaits approval by Digital Furnace shareholders and the satisfaction of other closing conditions. The operations and employees of Digital Furnace will be integrated with those of Broadcom's Residential Broadband Business Unit, also based in Atlanta.
Shares of Broadcom's Class B Common Stock are identical to Broadcom Class A Common Stock except for certain voting rights, may be converted into Class A Common Stock at any time at the holder's option, and are automatically converted into Class A Common Stock upon sale and most other transfers. Broadcom's Class A Common Stock is traded on the Nasdaq National Market(R); the Class B Common Stock is not publicly traded.
About Digital Furnace
Digital Furnace Corporation is a leading-edge communications technology firm that develops advanced voice, data and video solutions for the small office/home office (SOHO) and residential markets. Based on research by company founders Dr. John Limb, Georgia Research Alliance Eminent Scholar at Georgia Tech, and Daniel Howard, Digital Furnace's patent-pending Propane technology significantly increases the capacity of broadband networks, allowing cable operators to serve new markets while minimizing costly plant upgrades. The Digital Furnace management team includes experts in software development, telecommunications, broadband communications and video technology. Founded in 1998 with the support of the Georgia Center for Advanced Telecommunications Technology, the privately-held company is based in Atlanta, Georgia, and may be contacted at 770-263-0911 or at digitalfurnace.com. |
