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Broadcom to Enter Final Frontier in Broadband

May 02, 2000|KAREN ALEXANDER | TIMES STAFF WRITER

Broadcom Corp., the fastest growing chip maker ever, is expected to unveil a new circuit today that will launch the Irvine manufacturer into the competitive fiber optics market, the only segment of broadband communications the company has yet to enter.

The company hopes to translate its dominance of the high-speed market over standard copper wires to fiber-optic networks, where Lucent Technology Inc. in Sunnyvale, Calif., Vitesse Semiconductor Corp. in Camarillo and Conexant Systems Inc. in Newport Beach now hold sway.

"This is the most significant announcement we've made since the company went public" two years ago, said Henry T. Nicholas III, chief executive of Broadcom, a company that has made millionaires out of hundreds of employees with its surging stock price in the last two years.

"This is the last market that involves broadband communications that Broadcom was not involved in," he said.

The transceiver will extend Broadcom's ethernet networking capabilities beyond the corporate domain of local-area networks and into existing fiber optic networks that cover wider areas. It can transmit data over fiber optic networks at 10 gigabits a second over distances up to 50 kilometers, or 31 miles.

The new chip is faster and significantly cheaper than comparable products, which operate at 9.6 gigabits and cost as much as $1,300. Broadcom's will cost $88.

"It's a great market for Broadcom," said industry analyst Greg Collins, director at the Dell'Oro Group market research firm in Portola Valley, Calif.

The market for wide-area network equipment will amount to $32 billion this year and could reach $49 billion next year, Collins estimates.

Nicholas declined to predict the sales of the new product. He said the company has been focused on piercing this market for two years.

"It is definitely strategic for us," he said. "It will allow us to bridge the home computer with the business enterprise, and you will see a distribution of broadband throughout."

What's unclear is the extent to which Broadcom will be able to capture a significant market share, said Kimberly Funasaki, a research analyst at IDC in Mountain View.

"I think they will probably have a challenge trying to usurp market share from the incumbents of the marketplace," she said. "This is a new area for them."

Broadcom shares inched up $1.88 to close at $174.25 on Nasdaq on Monday.

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