CEO defends Broadcom amid stock plunge
Henry Nicholas asserts he is comfortable with Wall Street's near-term expectations for the company and says the chipmaker's future is as bright as ever.
Nicholas plans to take his case directly to shareholders Wednesday, addressing investors at the Credit Suisse First Boston technology conference in Scottsdale, Ariz. Chief financial officer Bill Ruehle had originally been scheduled to speak.
"At times like this, people want to see me," Nicholas told CNET News.com.
Shares of the Irvine, Calif.-based communications chip maker have fallen more than 65 percent since late last month, closing Tuesday at $85.06 after trading in the $250 range as recently as Oct. 23. Its shares are off 27 percent in just the past two days.
Salomon Smith Barney analyst Clark Westmont cut his price target from $300 to $200 on Monday, citing "signs of flattening orders in Broadcom's supply chain, inventory concerns in the digital cable sector and overall valuation compression" among communications chip companies.
However, Nicholas said the company's outlook hasn't changed. "We have confidence in the analysts' numbers," he said.
Although Nicholas acknowledged that the market--and not a Broadcom executive--gets to determine the company's valuations, he said none of the company's fundamentals has changed in the last few months. In particular, Nicholas rejected the idea that inventory corrections at networking and cable companies will hurt Broadcom's business.
"We think those concerns are overblown," Nicholas said.
"Just as confident"
Nicholas added that a slowdown in equipment orders from AT&T's cable arm is having a bigger effect on the companies that make the cable infrastructure than it is having on those that make set-top boxes or components for set-top boxes.
"We haven't seen any effect on box orders," Nicholas said. "Our visibility is unchanged."
Nicholas' appearance at the technology conference comes the same week as the company is focused on the Western Cable 2000 show in Los Angeles. The show is a major event for Broadcom, which is a leader in chips for cable set-top boxes and cable modems.
Earlier Tuesday, Broadcom announced a $776.6 million stock deal to acquire VisionTech, an Israeli maker of video compression chips. Broadcom plans to make more announcements at the show, including details of future set-top box chips that include the digital video recording functions enabled by VisionTech.
Deals like the VisionTech acquisition, Nicholas said, allow Broadcom to integrate on a single chip all the functions needed for a next-generation set-top box. These include video compression and decompression, 3D graphics and the ability to send voice phone calls and data over cable lines.
Over time, Nicholas said, ever-improving semiconductor technology will allow all of these functions to be integrated onto a single chip, but only if the company owns all of the necessary technology.
"Moore's law will either be your friend or your enemy," Nicholas said, making reference to the maxim put forth by Intel co-founder Gordon Moore that the amount of circuitry that can be put on a chip will double every 18 months.
Nicholas said the company is having an ever-easier time getting its chips designed into new products. "We still remain just as confident in the long-term outlook," he said.
Nicholas stressed that his goal in starting Broadcom was not to become rich, but the billionaire did call the recent stock drop "frustrating."
"It's a little frustrating to see when nothing has changed fundamentally...to see that the value of the company has been cut in half," Nicholas said.