Under the program, employees who have existing stock options will get to exchange them for new options, which will be granted about six months after the swap date, the company said late Thursday. The exercise price for the new options will be the last reported trading price of Broadcom shares on the grant date. The idea is that the new price should be far lower than the current price of most options that employees currently hold.
The cable modem chipmaker, based in Irvine, Calif., said approximately 45 million shares are expected to be eligible for participation in the new program.
Broadcom is joining a growing list of technology companies that have issued similar stock-option exchanges in light of the gloomy market conditions. Reduced spending by telecommunications-equipment makers has recently hurt Broadcom and the overall sector. Broadcom, for one, has watched its shares tumble nearly 60 percent this year. Shares had hit a 52-week high of $274.75 but have recently been trading at around $35 a share.
Like many players in the tech sector, Broadcom is also battling shareholder lawsuits, a trend verging on mania with the continued decline in the stock market. Law firm Schiffrin & Barroway on Thursday said it recently filed a lawsuit on behalf of its shareholders against Broadcom, alleging that the company violated federal securities laws. Broadcom is tied up in other shareholder lawsuits as well.
As an alternative to its new stock option exchange program, Broadcom also said employees can choose to retain existing options and receive a grant of additional options to purchase shares.
The amount of additional options each employee can receive depends on the exercise price of the existing options--larger option grants go to those employees holding higher-priced options. The exercise price for these options will also be based on the last reported trading price of Broadcom shares on the day they are granted.
"With the current economic slowdown and the recent drop in the market price of many technology stocks, including Broadcom's, we believe that this is the best way to continue to retain and motivate our most important asset, our employees," Broadcom CEO Henry Nicholas said in a statement.
Just last week, the company reported first-quarter earnings that met lowered expectations but said its business is not immune to the overall telecommunications downturn. At the same time, the company also gave investors few hopes of a turnaround, since it has not seen signs of increased buying from customers.