BroadLight acquisition bolsters Broadcom's portfolio
The semiconductor company is now well positioned to offer complete solutions across the access spectrum.
This year started on a good note for Broadcom with the acquisition of NetLogic, which will give a push to its infrastructure and network business, and the 5G Wifi solutions will gear it up to face competition from Qualcomm (QCOM).
Now, with the acquisition of BroadLight, Broadcom is well positioned to offer service providers complete solutions across the access spectrum from DSL to cable to PON.
Broadcom also faces competition from other semiconductor companies such as Nvidia (NVDA), Texas Instruments (TXN) and Marvell Technologies (MRVL).
Acquisition of BroadLight will add PON products to its portfolio
BroadLight is a provider of integrated networking and fiber access PON (passive optical network) processors. It is the technology and market leader in BPON and its successor GPON (gigabit passive optical network). Its products include GPON gateway processors and controllers for carrier-switching equipment. Recently, BroadLight proliferated its product line with embedded processors based on the NPU technology developed for its GPON products.
The acquisition enables Broadcom to offer a complete, end-to-end GPON solution to its customers, from the optical line terminal (OLT) at the central office to the optical network unit (ONU) at home. Broadcom believes that PON is a fast-growing segment with subscriber base growth forecast to be above 20% per year.
The BroadLight portfolio, combined with Broadcom's networking and management software, home networking portfolio and VoIP expertise, will offer customers a complete portfolio of wireline access products.
The home-entertainment and broadband segment contributes roughly 17% to our price estimate. Currently, Broadcom's market share is 30.7%, which we expect to grow marginally to 31.6% in 2012, and then stabilize thereon. However, if the market share reaches 40% by the end of our forecast period, there could be a slight upside to our price estimate.
In the first quarter, Broadcom introduced its latest generation of entry-level cable set-top box platforms to fuel global migration to HD and announced several partnerships in China to deploy Ethernet over Coax. Additionally, we saw Broadcom meaningfully expand its footprint in the service provider market by announcing powerful new products, including the world's highest density scalable 100-Gigabit Ethernet switching solution and next-generation high-performance stackable enterprise switches, among others.
Keeping in mind the record design wins in Q1 across all three segments, we believe Broadcom's product competitiveness is higher than it has ever been and remain optimistic on the future performance of the company.
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