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Conexant Zings Broadcom With Motorola Deal

Tech: Multiyear agreement to supply broadband chip sets makes the Orange County rivals the only two sources.

April 18, 2001|From Times Staff and Wire Reports

Communications chip maker Conexant Systems Inc. said Tuesday it agreed to supply chips to the broadband communications unit of Motorola Inc., competing with Orange County rival Broadcom Corp.

Conexant and Motorola declined to give financial terms or quantities involved in the multiyear agreement.

Under the deal, Newport Beach-based Conexant will supply packages of chip sets 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 are currently supplied to Motorola by Irvine communications chip maker Broadcom.

The strategy of relying on dual sources reduces Motorola's risk, said Mark Balog, director of semiconductor procurement.

"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.

Conexant's agreement with Motorola "does not affect our current contractual agreements with Motorola or our role as primary supplier of cable modem chips to them," Broadcom spokesman Bill Blanning said. "There will always be competitors who provide a second source to our customers.

"Ultimately it's all about execution and we're confident about our ability to continue delivering superior products to Motorola and all our customers," he added.

With this agreement, Motorola is now among the top 10 customers of the Conexant business unit that makes semiconductors for cable modems and digital TV set top boxes, Conexant spokeswoman Lisa Briggs said.

Conexant's stock edged up 29 cents a share to $9.04, while Broadcom's shares fell $1.71 to $29.40. Both stocks trade on the Nasdaq market. Motorola's stock closed at $14, up 25 cents a share, on the New York Stock Exchange.

Reuters was used in compiling this report.

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