Broadcom Posts $1.8B Loss, CEO Resigns
By Alex Romanelli -- EDN, January 23, 2003
Broadcom Corp. today posted a $1.8 billion GAAP net loss for Q4 2002 and announced the resignation of its CEO. The broadband and communications chips supplier has been hard hit by the recession and Q4 saw it undertake a massive restructuring, which included layoffs.
Henry T. Nicholas III has resigned from his positions as president and CEO of the company, and will serve out the remainder of his term as co-chairman. The company said he would not seek re-election to the board of directors at its annual shareholder meeting in May. Nicholas cited the separation of his family and divorce as the reason for his departure. Alan E. “Lanny” Ross, Broadcom’s current COO, will assume the role of president and CEO while the company searches for a permanent replacement.
“For the first time in a decade I’m going to make my family the priority in my life,” Nicholas said, on a conference call with analyst’s today.
Broadcom’s GAAP net loss of $1.8 billion, or $6.40 per share, looks catastrophic when compared with its Q3 net loss of $183.3 million, or 68 cents per share, and the net loss of $329.6 million, or $1.27 per share, in Q4 2001. However, this includes restructuring costs, several non-recurring and other charges, all of which were excluded from pro forma non-GAAP net loss, which came in at $6.6 million, or 2 cents per share, for Q4. Nicholas said he believes the company has successfully weathered the worst downturn in semiconductor history, citing Q4 as its sixth consecutive quarter of revenue growth. Nicholas said the company would return to pro forma profitability in Q1.
Restructuring
Broadcom’s Q4 charges saw it record a non-cash goodwill impairment charge of $1.2 billion. An additional $280 million non-cash charge was taken against taxes. The company also completed its restructuring, which cost $87.8 million. The company today confirmed this restructuring included the loss of 16 percent of its workforce or 487 jobs, the reduction of facilities, and other actions implemented November to streamline operations.
“It was a pretty significant restructuring,” said Linley Gwenapp, principal analyst with The Linley Group. “The percentage of people that got laid off was pretty high. They have completely reorganized a lot of the groups all the way up to the VP level. I think they’re really trying to clean up.
“Over the past few years Broadcom has been very aggressive acquiring quite a number of companies,” Gwenapp said. “They’re finally sitting down and weeding out the ones that have not done as well and realign their resources appropriately, rather than have this hodge podge of groups that have been glued together through acquisition.”
The company posted a Q4 net revenue of $295.9 million, a sequential increase of 2.1 percent from $290 million and an increase of 30.5 percent from $226.8 million in the year-ago quarter. Broadcom’s networking business helped the company beat its own Q4 revenue expectations of $290 million, said William J. Ruehle, Broadcom’s CFO, on the conference call.
“We are pleased to report we have done what we said we would do and in the time frame we said we would do it,” Ruehle said.
