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To: energy_investor who wrote (28)	5/14/1998 12:20:00 AM
From: ftth	Respond to of 36

[BRCM] Bargaining Power over Suppliers..........PART I Broadcom's primary external suppliers are the IC foundries and the packaged device assembly and test houses. Their bargaining power over these suppliers is initially favorable (when they are out "shopping" for the capabilities) because there are many alternative suppliers available for the volume levels they will be ordering. This initially favorable status helps them obtain favorable terms for the contract. However, once the decision is made and the agreement is completed, the bargaining power drops to moderate. Broadcom has some leverage afterwards, in that the suppliers want to keep their quantity business, but the suppliers also know that Broadcom must be somewhat flexible because switching fabs in midstream is risky and time-consuming. There is a limit to how much the fab can push back on Broadcom (for example, a bigger customer pays up to get their goods processed sooner, bumping those that were in line ahead of them), and the company has qualified a second source for both fab and assembly/test. Whether they could switch to the second source in a heartbeat depends on the backlog of allocated fab and assembly/test time at the second source, as well as how much Broadcom is willing to "pay up" for short-notice services. Still, they have a plan in place to cover such cases, and probably continue to check into alternatives on occasion, to make sure they are still getting favorable terms. Even though the terms of their agreement are likely favorable compared to other suppliers (presumably that's why they chose them), it is likely in my opinion that at some point they will get "bumped" from the fab or assembly/test queue. The lack of leverage in that respect is what prevents me from giving their bargaining power over these suppliers a favorable overall rating. Bargaining power over these suppliers is only moderate because they can be squeezed, and probably at the most inopportune times.

To: energy_investor who wrote (28)	5/14/1998 12:23:00 AM
From: ftth	Respond to of 36

[BRCM] Bargaining Power over suppliers.........PART II Although not generally thought of in this sense, their engineering staff is essentially a supplier of services to the company (and a key supplier at that). The engineers are under no obligation to remain with the company, and can go to a competitor at any time. Stock options are a powerful tool to indirectly exert leverage over this "supplier" (assuming of course that the stock options are worth a significant amount), although it will take a few years of nice gains in the stock price for this to have the desired effect of "monetary handcuffs." Further down the road these handcuffs can actually be a negative, but that's unimportant at this juncture. So currently, bargaining power over this supplier is low (once they're in place), although that can easily be made a non-factor by offering attractive compensation packages and working environment so they have no desire to leave. As far as adding new "suppliers" to their engineering staff, they are clearly able to lure engineers from competitors (which is important for their growth prospects), so they do have leverage in that respect. This rates as favorable because no one holds a gun to these people's head to make them switch companies. The compensation package, working environment, and future prospects of the company are viewed as more favorable compared to their previous employer. These previous employers often initiate "sour grapes" lawsuits (Sarnoff labs and Rockwell are suing Broadcom for "illegally pirating their employees"). These suits are generally without a substantial basis, and these previous employers could generally better spend their time and money fixing the internal problems that their management is in denial of.

To: energy_investor who wrote (28)	5/14/1998 12:25:00 AM
From: ftth	Read Replies (1) \| Respond to of 36

[BRCM] Bargaining Power over suppliers........SUMMARY Overall, their bargaining power over suppliers is borderline favorable. Qualification of a third fab and assembly/test house would raise this to a solid favorable rating. dh

To: energy_investor who wrote (28)	5/14/1998 9:38:00 PM
From: ftth	Read Replies (1) \| Respond to of 36

Hi Ray, here's a boatload of links to related topics. Information about NAPs, backbones, capacities, etc: pacbell.com 208.234.102.97 sprintbiz.com sprintbiz.com:80/data1/ip/ip13.htm nap.aads.net nap.aads.net isi.edu keynote.com boardwatch.com internetweather.com boardwatch.com digex.net nlanr.net www4.zdnet.com admin.oanet.com telechoice.com ameritech.net seas.upenn.edu There seems to be some general misconceptions that @HOME's service is "immune" to all the fundamental limitations of the internet (not helped any by some VERY misleading marketing fluff on @HOME's web page, as well as staged demos). I've tried to "gently" get that point across on the @HOME thread, but to no avail. There is enough cross-confirming information in these links to convince even the most brainwashed hypester that @HOME's presence on earth doesn't SOLVE the internet bandwidth problems. @HOME's residential service helps in most, but not all cases, BUT it does not SOLVE it. No one could read through all these links and not come to that conclusion. No possible way. Plus, I HAVE the service. All these limitations play out in practice. I have software to monitor transfer rates and histogram transfer rates by various categories, and @HOME's level 2 customer service has confirmed my connection is fine on many different occasions, and has also confirmed the transfer rates I'm seeing. I have never, ever, exceeded 1.5 megabits per second ( and that's only approached within the @HOME intranet). Real "internet" access never exceeds 500kbits per second, and is generally MUCH lower. Still, it is on average faster than the telco ISP connection I still have. Maybe 2 to 1 (in other words, a quarter second versus a half second for a typical page). The reasons I have kept the @HOME service are: 1)large file transfers (which I do frequently)via ftp are significantly faster than the dialup ISP. 2)phone line is freed up. 3)multiple email accounts. 4)emails with large attachments pull up very quickly If all I wanted was my generic internet access to be faster, and had no other reason, it is not worth $45/month +$150 install, versus $20 per month plus and a $100 modem for a dialup ISP. The difference in that case (because the data is in short bursts and not much data is transferred) is not worth a 2x price premium. Note I'm also placing zero value on their canned content. Most people would probably give it some value. Maybe some day it will have some value for me too, but I don't find the current content to be of much use. Also note that what I say above in no way sways my opinion of @HOME as an investment candidate (or very small sway at most) because I have never felt the residential internet access revenue was the most significant part of this company's potential. I know this information is going to rub some people the wrong way (i.e. anyone that's "in love"), but I would challenge anyone to prove me wrong. This information isn't speculation. I have the service. Reality played out just as theory would predict. dh