Broadcom co-chairman Henry Samueli told CNET News.com last week that the company would continue aggressively acquiring companies as it looks to double its work force in 2000. Today's deal marks Broadcom's ninth purchase since the beginning of 1999.
Pivotal specializes in digital video interface chips that connect home digital devices, such as a set-top box and a high-definition television set. The company also designs Bluetooth chips, which allow devices to wirelessly link to one another in "personal" networks.
Broadcom, already a leader in the market for the chips that power digital cable set-top boxes, has been looking to grow its silicon content there and elsewhere. Pivotal's technology will become important as Broadcom's digital set-top boxes start connecting to digital devices as opposed to analog TVs.
"This is kind of the final link, if you will," said Rich Nelson, Broadcom's director of product marketing for cable and TV products.
To acquire Pivotal, Broadcom said it would issue approximately 1.94 million shares of its stock, which closed yesterday at $125 a share.
An important aspect of the deal is that Pivotal's chips incorporate an encryption scheme that secures the data as it travels at nearly 3 gigabits per second from set-top boxes to a digital display, Nelson said.
Hollywood, Nelson noted, is saying, "We don't want cables running around with our highest quality digital content being sent around" unprotected.
Pivotal chief executive K.C. Murphy will continue to lead his 65-person team as a vice president and general manager of a new Broadcom unit focused on what it calls the personal area network. Pivotal also makes its DVI chips to allow computers to talk to flat panel and other digital displays, an area the company plans to continue working in.
Financial analyst Jeremy Bunting, who covers Broadcom for Thomas Weisel Partners, said that getting Bluetooth technology is an added bonus for Broadcom that could find its way into future home networking products or even more advanced remote controls.
"To get the interface from the TV to the set-top box at the same time as picking up Bluetooth, to pick all of that up in one shopping spree, I think is great," said Bunting. Bunting said Broadcom is one of only two communications chip firms he rates a strong buy, the other being PMC-Sierra.
Already this year, Broadcom has acquired BlueSteel Networks, a maker of network security processors, and Digital Furnace, a maker of software that boosts the capacity of existing networks to allow more interactive services. In March, Broadcom said that it will acquire 3D graphics firm Stellar Semiconductor
Last year, the Irvine, Calif.-based company acquired five businesses: HotHaus, AltoCom, Maverick Networks, Epigram and Armedia.
Bunting said all of the acquisitions allow Broadcom to offer chips that integrate more features, a move that makes Broadcom's chips more attractive from both a cost standpoint as well as in bringing new products to market quickly. Among the companies that Broadcom competes with in the set-top and cable modem markets are Orange County neighbor Conexant Systems, Texas Instruments and European firms STMicroelectronics and Philips.