Tuesday February 29, 12:03 am Eastern Time
Broadcom in $136 mln deal to turbocharge cable modems
IRVINE, Calif., Feb 29 (Reuters) - Broadcom Corp. (NasdaqNM:BRCM - news) said on Tuesday it was buying
Digital Furnace Corp. in a $136 million stock deal that will give the communications chip maker software to turbocharge cable modems used to access the Internet at high speeds.
The big prize from the deal is Digital Furnace's software called Propane, which will run on Broadcom's cable modem chips. Cable modems can let users surf the Web at speeds more than 20 times faster than the best dial-up modems.
Propane, an upgrade to a cable industry's Internet standard called DOCSIS 1.1, uses special mathematical algorithms to keep the flow different kinds of Internet traffic neat and orderly, executives of the two companies said.
The effect is to speed up the rush of data by as much as three times, making Web pages load more quickly and potentially tripling network capacity without installing costly new hardware.
``When you combine many different data types and forms like voice and video over the same broadband pipe, you end up with issues that cause delay and capacity problems,' Digital Furnace Chief Executive Officer John Lappington said.
``You can quickly overload your network,' Lappington said in an interview.
Broadcom expected to start delivering chips using Propane within a few weeks, and the deal would start adding to its bottom line within a year, Chief Executive Officer Henry Nicholas said.
``We haven't finalized the business model. We may sell the software or may bundle it with chips that we sell,' Nicholas said in an interview.
Broadcom will issue 750,000 shares of stock to pay for the purchase. At Monday's closing price of $181.50 a share, that values the deal at $136.1 million.
The Irvine, Calif.-based company also said it will take a one-time charge to earnings for its first quarter ending March 31 to cover expenses relating to the acquisition.
The Propane software, which runs only on Broadcom's DOCSIS 1.1 chips, gives the company a new weapon in the battle to dominate the high-speed network hardware industry.
Broadcom, whose chips already power the vast majority of cable modems, had started working with Atlanta-based Digital Furnace more than a year ago in hopes of a breakthrough that would have a big payoff, Nicholas said.
``The knocked the cover off the ball,' Nicholas said of Digital Furnace's development of the software. ``This is a tremendous thing for the industry as a whole.'
While Propane would make multimedia applications such as video-conferencing and Internet telephone service faster, Nicholas said the biggest benefits would be to the operators of cable networks, who could add more subscribers without having to add more equipment.
``The real home run is that you can support three times as many cable customers on the head-end as you could before,' Nicholas said.
He said the technology could significantly boost the roll-out of cable Internet services, which are already expected to reach 26 million households by 2005, according to technology research firm Forrester Research.
The company also has its eye on developing similar software that will control equipment for wireless Internet access and digital subscriber lines, or DSL, technology that is the main alternative to cable networks.
``We believe this is just the first in a whole line of products that we would implement to increase the throughput of broadband delivery systems,' Nicholas said.
biz.yahoo.com
Sounds like good news to me. Does anybody know if BRCMïs competitors have something similar in their pipeline?
Neville |
