BROADCOM (BRCM) 62 11/16 +8 15/16 The telecom chip manufacturer gets a huge vote of confidence today on several fronts. First, they announced that Nortel Networks (NT) will use the Broadcom Very high-speed Digital Subscriber Line (VDSL) technology for their Universal Edge 9000 products. This puts Broadcom in a very strong position to benefit from the growth of xDSL broadband. As if it weren't enough, Broadcom also gets good ratings today from two of Wall Street's most influential technology investment banks. Morgan Stanley Dean Witter raised its rating from Neutral to Outperform. NationsBanc Montgomery Securities started coverage today with a Buy. Nortel's products are sold to telecom companies to allow broadband transmission from the central office to homes and businesses, as well as to businesses wanting broadband transmission in their networks. In the battle for the broadband transmission infrastructure, Broadcom's relationship with Nortel is very reassuring for Broadcom. It seems certain, at least to Briefing.com, that cable modem and xDSL technology will coexist and that neither will completely wipeout the other. But, by and large, xDSL technology suppliers are financially much healthier. Companies on the cable modem side of broadband, like @Home (ATHM) and COM21 (CMTO), have a long way to reach profitability, but Broadcom is already profitable and growing quickly. If the battle for broadband capability ever develops into price pressures, companies like Broadcom will weather the storm better. The cable modem companies will likely grow at a terrific rate over the coming few years, but from a investors viewpoint, companies on the xDSL side seem like better bets, largely because of the lower valuations and stronger financial positions. Broadcom, even with a Price/Sales of 25 and PE of 138, is one of the better ways to play the coming broadband revolution.
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