Tuesday April 17 8:41 PM ET
Conexant to Supply Motorola
Broadband Unit
By Timna Tanners
LOS ANGELES (Reuters) - Communications chip
maker Conexant Systems Inc. (NasdaqNM:CNXT -
news) on Tuesday agreed to supply chips to the
broadband communications unit of Motorola Inc.
(NYSE:MOT - news), competing directly with the
second-largest mobile phone maker's current supplier, Broadcom Corp.
(NasdaqNM:BRCM - news).
Conexant and Motorola declined to give financial terms or quantities involved
in the multiyear agreement.
Under the deal, Newport Beach, Calif.-based Conexant will supply packages
of chipsets and software to Motorola's broadband communications division,
primarily for use in set top boxes, cable modems and voice over Internet
protocol.
Motorola officials said Conexant would be a second source for the products,
which have been supplied to Motorola by cross-town communications chip
maker Broadcom, headquartered in Irvine, Calif.
Mark Balog, director of semiconductor procurement, in an interview said a
dual sourcing strategy reduced Motorola's risk.
``The infusion of competition will make an already good supplier (Broadcom)
even better,'' added Keith Jones, director of supply chain management, or
procurement.
``It may be a negative for Broadcom because now they have true competition
in the broadband space. But I think it's a net positive because it will help keep
them very focused on our business and probably accelerate their product
development in the market as well,'' Jones said.
Motorola and Broadcom did not specify how the Conexant agreement would
affect Motorola's contractual primary source agreement with Broadcom.
``There will always be competitors who provide second source to our
customers,'' said Broadcom spokesman Bill Blanning. ``But it's ultimately all
about execution.''
The news of Motorola's agreement with Conexant comes the day after weak
earnings news from Cisco Systems Inc. (NasdaqNM:CSCO - news), one of
Broadcom's 3 major customers along with Motorola and 3Com Corp.
(NasdaqNM:COMS - news).
``Has a market opportunity share been eroded for Broadcom? The answer is
yes,'' said Banc of America analyst Alex Gauna.
He said the near-term affect to Broadcom would be minimal, but sales results
in 2002 would likely reflect a percent of the upside business opportunity lost
to Conexant. |
