Exhibit 99.1
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
PARTICIPANTS
Corporate Participants
Ross C. Seymore — Research Analyst, Deutsche Bank Securities, Inc.
Scott A. McGregor — President, Chief Executive Officer & Director
Ronald Steven Jankov — President, Chief Executive Officer & Director, Netlogic Microsystems, Inc.
Scott A. McGregor — President, Chief Executive Officer & Director
Ronald Steven Jankov — President, Chief Executive Officer & Director, Netlogic Microsystems, Inc.
MANAGEMENT DISCUSSION SECTION
Ross C. Seymore, Research Analyst, Deutsche Bank Securities, Inc.
Good afternoon everyone. Thank you for sticking around to the end of the day. We are pretty
happy to have some more exciting news than frankly we even expected today. So, we have the CEOs
of both NetLogic as well as Broadcom, which soon to be one company both here on stage. So, both
Scott McGregor and Ron Jankov are going to do a little bit of a tag team presentation, a little
bit about the deal that they just announced yesterday morning for Broadcom to acquire NetLogic.
And then we’ll open it up to Q&A after that.
So, Scott and Ron, if you want to step up to?
Scott A. McGregor, President, Chief Executive Officer & Director
So, Ron and I have — come on up Ron. We have a couple of slides and then we’re sort of going to
mix and match a little bit. So bear with us. What I’d first like to do is talk about the
transaction. It’s a definitive agreement to acquire NetLogic and both our boards unanimously
approved the deal. It’s $50 a share and net of cash assumed it’s $3.7 billion in deal size. 100%
of the cash goes to shareholders and we’ll also assume the equity within NetLogic and we put the
numbers up here so you can get your models right, $450 million and 15 million shares.
We
expect to close in the first half of 2012. We [need] the approval of NetLogic’s shareholders.
We have regulatory clearance [requirements] and we expect to file in China, Taiwan and the United States. We
don’t expect any unusual issues and then other customary closing conditions there. We believe
for Broadcom, it will be accretive to revenue growth. It will be accretive to our non-GAAP
product gross margin. And we believe that it will be accretive
to [non-GAAP] EPS of approximately $0.10 in
2012 and more than that in 2013. So, Ron.
Ronald Steven Jankov, President, Chief Executive Officer & Director, Netlogic Microsystems, Inc.
Thanks Scott. This is a great deal for NetLogic across the board, especially our customers. We
have got some great technology. We are really making a breakthrough with the XLP II which we
just announced last week. The new KPBs that are ramping and IPv6 taken across the board, the new
DSE products as well. But we are still a pretty small company and this gives us the opportunity
to be a part of a bigger footprint. For example, we are really just starting to break into
Europe and we’ve only got a couple of people in Europe and they just don’t they don’t want to
make this big
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 1
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
long-term decisions. They are betting their whole product future on NetLogic and they’re not
comfortable with that.
But they are certainly willing to bet on Broadcom with NetLogic’s technologies. It’s a great
deal for our customers. It also opens up a platform opportunity, the ability to even look at the
partitioning on the card where we sit together and we can make more efficient positioning by
working together. It is just a, it’s a really good thing for our customers. It’s a good thing
for the NetLogic employees and for a lot of the same reasons. We have got such a great
architecture and so much breakthrough that’s going on right now in product development and we
never would have seen as a full actualization of those great innovations and breakthroughs as a
smaller company. But we are going to be able to do that as part of Broadcom. I mean Scott and
Rajiv and Henry Samueli have really gotten behind us. They want to take this technology and
really proliferate it and really take it to the next level.
So that’s an exciting thing. Because we are mainly an engineering company. We are probably 80%
engineering. This is an exciting thing for engineering. Obviously for you guys, shareholders, it’s a
great return on investment, all cash deal, so it’s a good thing for everybody involved.
Scott A. McGregor, President, Chief Executive Officer & Director
One of the things that we are excited about at Broadcom with this acquisition is the increase in
our addressable market or our say unserved addressable market. So if we look at our addressable
market in 2010, we estimate it was about $3.4 billion with the Broadcom core businesses. With
the acquisition of NetLogic plus the microwave backhaul small Provigent acquisition that we
already did, we believe by 2015 our addressable market goes to $12 billion and so gives us
considerable more headroom and opportunities to invest here. You see microwave backhaul,
knowledge based processors, embedded processors and also wireless infrastructure, we believe all
of these markets are now available to us going forward and we will do our best like we do in
other markets to attempt to get number one positions in each one of those.
So overall on the deal to summarize it up, it’s accretive to growth, the leading multicore and
knowledge based processors are great technology. It also with the Optichron acquisition that
NetLogic did, there is some great front-end technology for wireless base stations as well. And
as I showed on the previous slide, it substantially increases our addressable market.
It is accretive to margins. We expect that the non-GAAP product gross margin for all of Broadcom
will go up by over 100 basis points next year concluding this transaction. So that’s good for us
there. It’s accretive to EPS. On a non-GAAP basis we expect about $0.10 per share in 2012 and I
said it would be more other than that in year two, 2013 post integration. It is an all cash
deal. We are capable of funding this out of our cash balance. We will look at the utilization of
our capital to drive our revenue and earnings leverage going forward.
So let me just summarize, it’s great technology. I think the NetLogic people have done a
tremendous job creating really leading edge technology and we are excited to bring that into
Broadcom.
Driving integration, by taking the NetLogic technologies and the Broadcom technologies, bringing
them together, initially first as chips that sit side-by-side in boards with customers and over
time integrating them into the same device. It’s about expanded market opportunities, going from
$3 billion to $12 billion on the SAM for us. It’s about profitability, increasing profitability
of the company. It’s financially compelling. We believe it’s an excellent fit for both of our
shareholders and for our customers and employees going forward.
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 2
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
So with that we’ll stop. You can get additional information on our either of our web pages. We’ve
also filed all of the merger documents and you can get those on the web as well. So with that we’ll
stop and let you take questions.
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 3
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
QUESTION AND ANSWER SECTION
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: You guys get sat down a little bit. So
why don’t I start with Scott. From the Broadcom perspective, you’ve done a number of acquisitions
over the last decade. It’s a core part of what makes Broadcom successful. This is the largest one
in recent memory and maybe the largest one ever. What do you think the challenges are? Well I guess
first, what led you to doing a larger acquisition and two, what do you think the challenges are of
integrating an acquisition of this size?
<A — Scott McGregor — Broadcom Corp.>: Let me first talk about why a large company when
typically we bought smaller companies and then how do we feel that we mitigate risks on this
integration. Broadcom has had a strategy over our course of our company to mostly acquire either
pre-revenue or early stage revenue companies. They tend to be very easy for us to integrate. They
don’t have a lot of infrastructure. You can just slot them into the company. And we think of it a
little bit like if you have a server or a switch, you can think that like a blade architecture,
where you’re acquiring a new blade. You’ve already got the power supply and the chassis and
everything. You get a new blade, you slot it and you just increase the overall capacity of the
system.
When we look at larger deals, we do look at them from time to time. But for us, it has to be even
more compelling, because there is potentially higher integration risk and just more work to do
integrating it in. We also believe that Broadcom adds incredible value when we buy a startup
company because many of our customers don’t like to buy from startup companies. And they prefer to
buy from a more established company. That’s less true with a NetLogic which is a real company and
has a good reputation in the marketplace.
So why we would we look at a large transaction? Well because we believe it’s incredibly compelling.
We looked at all the different opportunities to get into the network processor and embedded
processor space. That was a high priority for us from a portfolio point of view. We have sort of
three choices. We could do it organically which we are quite capable of doing. We could buy one or
more startups and then put organic investment in them to drive it to market. And you will observed
it, for example, we did make an investment in a company called Tilera which has got very high
performance embedded processors.
And then the third possibility would be buy a larger established player. The advantage of a larger
established player is very much faster time to market and less development risk, less design win
risk of the acquisition. However, it would cost more and it might be potentially more difficult to
integrate. So those are the downsides.
Startup companies, much more risk, much more time to get to market doing it organically, much more
investment that would take away from other investments we could do and then all of the risks and
time to market issues as well. So we decided looking at all the possibilities and looking at the
different players that NetLogic got us to market the fastest. We believe they had the best
technology. We kicked the tires on all the other companies out there. We believe they’re a quad
issue, quad threaded cores are extremely good technology, and we felt the team was good.
Getting to the integration, how do you mitigate integration risk. One of the things that governs
the difficulty of an integration is the cultural fit. If you acquire a company that has a very
different culture than yours, that’s going to be probably a difficult integration. One of the
things we liked very much about NetLogic is it felt like this was a Broadcom team. Okay, these are
guys passionate about innovation, passionate about engineering execution. As Ron said it’s like 80
percentage in yours. I mean it’s a geeky company just like us. And so that mitigates the risk.
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 4
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
This is a large acquisition. Certainly it’s the largest one from the size of the check we have to
write for the acquisition, but it’s not as large from a people point of view, it’s about what,
about 700 people. So it’s expensive admittedly, but it’s not large from an organizational size.
Rajiv’s organization when we’ll integrate this, is substantially larger than NetLogic, it’s
thousands of people. So we’ll be able to integrate that in I think in a straight forward fashion.
I also believe that it’s fairly well contained within our infrastructure team and we feel good
about the people. We’ve had extensive conversations with Ron and with Ron’s staff and they are good
folks and we think they’ll fit well into Broadcom. Ron has agreed to stay with Broadcom and will be
part of the integration team. That always makes things easier as well. So we believe it’s an
achievable integration and is going to deliver good results.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: I guess one question from the NetLogic
side of things then. Ron, NetLogic was one of a very, very small handful of true growth companies
within the semiconductor market. As investors are looking around at the premium valuation you had
even prior to this deal, it was quite large and well deserved given the growth rate that you had.
So given that unique scarce performance, why choose to sell at all?
<A — Ronald Jankov — Netlogic Microsystems, Inc.>: Sure, well I would emphasize one of the
things that Scott said, is we look around at if we were ever going to be joined with another
company, to us the only one that had a cultural fit was Broadcom. I mean not only are we a fit in
terms of the product lines are very similar and that we — not similar in terms of competitive, but
we are on the same cards with the same kind of products, end product, same customers. And so it’s a
very, very synergistic fit.
We have been working with their switch team and their network processor team for five or six years.
And over those years the two teams have gotten to know each other really well and there’s a great
deal of integrity and respect between those teams. And I just think our engineers couldn’t imagine
working for another semiconductor company that’s large other than Broadcom. So this was the right
math. So when Broadcom came, when Scott approached me, we were open to it just because of that
cultural fit. We knew that people would be happy there and be able to excel there.
I think the other big part of it is as I mentioned, this is an opportunity for us to take our
technology to another level. And it is you never know financially how things would work two or
three years or five years from now if you are on your own. But one thing I do know is that as a
part of Broadcom, these products that we put myself personally almost 12 years into, they’re going
to be more successful as part of Broadcom. I’m totally confident of that. We are going to be able
to reach more customers. We are going to be able to take the level of manufacturing expertise to be
able to do bigger and faster and better chips and more of them. We are just going to be able to
accomplish a lot more. And for us that’s a lot of it. We want to really become a great division of
Broadcom and have our products be the most successful possible and I think this is the best
opportunity for us to be there.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: And as both of you have I’m sure
talked to customers over the last 24 hours about this, what’s been the customer reaction?
<A — Scott McGregor — Broadcom Corp.>: I’ve talked to customers and generally they have
been very positive on this. I mean a lot of them want to understand the implications and what are
we going to do and how are we going to tie the chips together. But I’ve heard a number of very
positive reaction.
<A — Ronald Jankov — Netlogic Microsystems, Inc.>: Yes, I’d say it’s very positive,
especially some of the new customers we were trying to penetrate that were on the fence and they
are comparing us with some really large companies. Not really large compared to Broadcom but really
large compared to NetLogic. And this is great because they really loved our technology, but it’s a
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 5
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
big bet. They’re betting billions of dollars of end equipment on this, right. So they are a lot
more comfortable betting on this combination than they would have been betting on us ourself.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: They keep betting billions on you too.
<A — Scott McGregor — Broadcom Corp.>: Either way billions, which is good, very flattering.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: I have a lot more questions but I’ll
take a chance to see if the audience has any, I can open it up. There’s a microphone that will be
coming from behind you there so hold on until, it should get back to you.
<Q>: For both Scott and Ron, I’ll focus the question on both of you. Why was this the right
time, depending on the evolution of the market to make this deal? Then specifically to Scott, why
was this the right price at this level in light of market weakness. Just to put it in perspective
and in terms of Scott, how confident are you paying this price on the ability to execute on this
acquisition? Thank you.
<A — Ronald Jankov — Netlogic Microsystems, Inc.>: Sure. I will talk about the timing,
because I mentioned it before. But we’re at a real inflection point, particularly on the processor
side where you know where we are ramping into production on the 40 nanometer with the new XLP
architecture. And we just announced the XLP II architecture with it takes us to the next step. You
know 680 [ph] NX CPUs (15:28) that are able to work coherently together. This is very, very complex
and it’s a big decision for customers to make the commitment to this kind of architecture. And it’s
also you know for us again the manufacturing scale that we are going to need to be able to produce
enough of these per what is possible and achievable for us. So this was an inflection point for us
where we get the maximum benefit of now becoming part of a larger company. So that’s the timing
from our standpoint.
<A — Scott McGregor — Broadcom Corp.>: I think on the price too, I think Ron and his board
wouldn’t take any less and I wouldn’t pay any more. So that’s what gets you to that number. It’s
also the market sets the price and if you look at the stock price of NetLogic, it’s been very high.
They’ve always commanded a high multiple. The company was trading in the mid 40s not too long ago
and that certain expectations wasn’t possible to buy the company in the 30s. Would I have loved to
pay less for it, absolutely yes, I even thought of that idea and tried it with Ron and it didn’t
work.
Your other question was also on timing. Timing is a function of when companies talk to each other,
when it makes sense to get together. Some transactions are not executable or executable at
different times. So I think it’s a timing when it made sense. It’s an inflection point in the
market. I think if we had tried to do it six months ago, we probably would have had to pay more and
I wasn’t willing to do that.
In terms of our ability to integrate, I said just a little while ago that there are a number of
things that make this easier integration than the value would imply because of the relatively small
number of employees for the value, because the locations are the same. They’re headquartered in
Silicon Valley. Silicon Valley is about the same size as Irvine for us in terms of one of our
largest facilities. Your second largest, NetLogic’s second largest facility is in India, so is
ours. We have a huge facility over there as well.
And so it will be easy I think in terms of people dynamics, in terms of culture, facilities,
product fit, overlap of customers. It just has all of the hallmarks of things that will generally
go well. So relative to the size of the dollar amount, it will be a relatively straightforward
integration. Now, don’t get me wrong, it’s always a lot of work to do an integration and we’ve done
about 50 of them now. And this
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 6
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
is one that we’ll have to pay attention to and make work and Rajiv and his team are committed to
do that and I’m committed to make sure it happens.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: We have another question right up
front here.
<Q>: It’s for both of you, but Ron we’ve talked in the past about the lag time between a
design win at a equipment manufacturer with actual revenue recognition for NetLogic. The combo now
with NetLogic and Broadcom and the combined engineering teams and what have you, do you find that
— do you think that that will help accelerate the development process of the end customers boxes
at all or it’s just going to manifest itself in more confidence in future design wins.
<A — Ronald Jankov — Netlogic Microsystems, Inc.>: Yes, I think the signed ones we already
have won, that’s really based on how long the customer needs to complete their software, to get
qualified by their end customer, where the carrier or whoever that might be. That’s not going to
change a lot because of this deal. But it does make a big difference on the pace of designs we are
going to win, starting now going forward. And even beyond that, the pace at which we are going to
able to bring new products to market and the extent of the market breadth we can do in terms of the
kind of customers and kind of products we can do. So, it’s more about the forward looking than it
is about designs that were already won.
<Q>: [inaudible] (19:30)
<A — Ronald Jankov — Netlogic Microsystems, Inc.>: It’s typically one to two years from
when we get a design win at high volume.
<Q>: [inaudible] (19:43)
<A — Ronald Jankov — Netlogic Microsystems, Inc.>: I think it will be same, would be my
guess. I think it’s based on the customer’s ability to get their product to market, but starting
now we should be able to win more designs.
<Q>: Related to that, just Scott can you tell us what your expectations are and timing wise
regarding deal synergies on either the product cost OpEx side? Can you just talk about sales a
little bit to the extent you have ambitions or goals that you can talk about at this point?
<A — Scott McGregor — Broadcom Corp.>: In terms of synergies, many M&A transactions are
structured such that the value of the transaction comes from the elimination of the duplication
between the companies and corresponding cost savings. That’s not the case in this acquisition. We
are acquiring NetLogic because we want to take their products, their team, all the work that they
have done and actually accelerate it. Okay, so fold that into Broadcom and accelerate it. So we
model some synergies into the transaction. I think if you were to do the math of just taking the
two companies and putting them together for 2011 and or 2012 and assuming three quarters, you’d
probably observe there’s probably $0.07 of [non-GAAP] EPS accretion and we’ve got $0.10 in the model. So we
assume we will get some synergy out of some cost benefit. There is two public companies you can
save some money by only having one public company, especially in Sarbanes-Oxley world. So there are
some cost savings you just get by putting the companies together. But we are not modeling any
synergies for cost savings in engineering or any of the products side.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: Scott on that synergy side of things,
a lot of what you talked about TAM or SAM wise especially for your company seems very compelling,
it gets you into new markets. But even more compelling it seems is the breadth that you can bring
to the market to leverage what NetLogic already has. How should we think about how long it will
take before you will see the combined entity and that scale that you can bring to customers,
benefit
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 7
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
the revenue growth on either side or the combination of the two? Is it something you have to wait
for these one year to two year design cycles or can you bring a bigger portion of the bomb on a
given board to bear and get the benefits earlier than that?
<A — Scott McGregor — Broadcom Corp.>: I think your point is right, I mean it’s really a
great strategic fit and very synergistic from a 1 plus 1 equals 3 point of view as opposed to 1
plus 1 equals cost savings therefore 1.5 point of view. In terms of winning new designs, I think
Ron was right and it takes a while to win the designs and then get them to revenue and things like
that. I think immediately customers who might have been on the edge of whether they would go with
NetLogic or a competitor now will have more confidence to go with our solution. So you could get
more design wins fairly quickly moving in our direction. I think there are things we can do
technically. We do need to wait for the deal to close before we can do some things. We need to run
as independent companies in the meanwhile, but we can begin planning for that. But I would assume
over the next several years we’ll definitely get benefit from the companies together which would be
more than we would get as the sum of two separate companies.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: And I guess one final question on that
topic. The boxes you are going into, the customers you are addressing are very performance specific
and centric, less so on the pricing side of things. When you go with a higher percentage of the
bomb argument to them and say we serve all these different parts bundled or otherwise, whatever
terminology you want. Is that something that’s compelling to them, where they can get more of the
chips on a given board? Or is it in the market that you are playing in not necessarily a driver of
revenue synergies?
<A — Scott McGregor — Broadcom Corp.>: Ron, you can make a comment too. But I think the
better value to the customers is improving the performance, improving power consumption, improving
features, and I think that motivates them. I think one-stop shopping for the dozens of chips they
need in the box is less compelling. I think that’s more compelling on the cellular side for us in
like combo chips because it’s incredibly hard to get radios to work with each other.
Okay, I think in the network infrastructure space, you assume that you can get the chips to work
with each other and you bash the vendors until they do. But in the cellular world, it’s much more
an art to get the radios to work together and so one-stop shopping I think has higher value there.
I would believe the value we will get will be the value of for example designing knowledge based
processors at the same time you design a switch with the architects working with each other so they
are both optimized. And that something we would not have done in normal course. I think designing
network processors so that they partner with all the rest of the systems is a real advantage.
<A — Ronald Jankov — Netlogic Microsystems, Inc.>: I was actually going to just say the
same thing that you just mentioned it. For the last five years, we have been partnering, one of our
closest partners in semiconductors has been Broadcom on the switch and network processer side. And
so our teams would get together and discuss what kind of functionality we had to have on the KBP to
make it work better with their switches and with their network processes. But probably we only got
20% of the total value out of that because we were both hesitant as different companies to exchange
a deeper amount of information that would allow the total system to have been much better, for our
KBP to be much better matched with the switches or for the network processors.
As one company, we can get behind that and get past that and get 100% of the value of having KBPs
that are totally optimized for the best functionality with these switches and network processers.
And I think we have taken that to the next level just over the last six months, where in addition
to putting our KBPs together with their switches and network processers, they started to put our
XLP control playing processors as part of that. And that has included your big team in North
Carolina that does all the software work for the upper layers of software. And again I would say we
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 8
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
are getting 20% of that synergy right now as, if we’re part of Broadcom and when we’re part of
Broadcom, we’re going to get 100% of those synergies. So it’s another 80% more synergies on that
XLP together with the network processors and switches. So it’s a big deal for our customers.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: Any other questions from the audience?
Get the mic again.
<Q>: So we know the NetLogic background and but Broadcom has fingers in a lot of different
areas. Forget about the hard drive business, but let’s think about the set-top box, the cable
modems. Is there a bigger picture to the bigger picture outside of the infrastructure piece where
you are looking at the next evolution of the set-top box, WiFi access points et cetera, and putting
intelligent routing all the way from one end completely to the other?
<A — Scott McGregor — Broadcom Corp.>: One of the things that Broadcom I believe does
better than any other company I am aware of is co-operation across the different divisions and
sharing IP and doing different things. So for example, the video processor that is designed in our
cell phone group shows up in a set-top box and we’re just really good at sharing those things. Once
we close this transaction and NetLogic is part of Broadcom, I believe there are definitely
technologies that we would use around the company. They have a very, very fine MIPS processor
architecture and that’s perfectly good for network processors but it could be used in other kinds
of devices as well. So I could imagine that would be a core competence we would want to look at for
deployment elsewhere within Broadcom.
When I look at some of the Optichron, the front-end technologies, pre-distortion for amplifiers and
things like that, that’s a fairly generic radio technology and that has applicability in other
parts of products that use radios and we do have a fair number of those. So I think there is a lot
of opportunity to share technology. And one of the things that we’re excited about is that if you
get the very best engineers together and they start sharing ideas and working together, we have
seen very, very good track record of promulgating those technologies across different groups. So I
am giving you a generic answer rather than specifics, but we do have some things in mind and we’ll
let those roll out in due course.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: Okay, we have about two minutes left.
So I’ll get on to the more mundane side, Broadcom also reiterated its guidance. You are not going
to be presenting here tomorrow because you have just a few other things to deal with. I will hit on
that, you had reiterated guidance at the midpoint of the range. Any dynamics within the three
segments because I believe your guidance was for very different growth rates between your three
primary segments. Within that reiteration, any sort of dynamics that are differing between the
three?
<A — Scott McGregor — Broadcom Corp.>: The quarter is pretty much playing out as we saw it.
I don’t see any major perturbations across the segments, Ross. I’d say it’s pretty much playing out
how we thought.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: That doesn’t take two minutes, you’re
supposed to take longer than that.
<A — Scott McGregor — Broadcom Corp.>: I could repeat it.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: I was hoping for more. Well let me
just fit one more in on another side then, large deals the new norm for Broadcom?
<A — Scott McGregor — Broadcom Corp.>: Well not in the near future. We used up most of our
cash. So I’d say we’re not going to do another multi-billion dollar transaction in the near
future. In general, we don’t like large transactions because of the potential difficulty of and
more difficulty
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 9
Broadcom Corp.
|
Deutsche Bank | |||||
| SecuritiesTechnology | ||||||
| BRCM | Conference | Sep. 13, 2011 | ||||
Company ▲
|
Ticker ▲ | Event Type ▲ | Date ▲ |
realizing the value. But again I would encourage you to look at this transaction as one that is
actually more like a typical Broadcom transaction than it might seem at first wash if you just
look at the price, okay. The culture, size, ability to taking emerging technologies and develop
from I would say the network processor technology and embedded processor technology is an
emerging technology and at the very youth point of its potential.
And we believe it can go — they can get a lot more market share than they currently have. There’s a lot of opportunity there. I think some of the other
technologies they have in the company
such as the front end technology just at the very beginning, nascent stage. And so it has a lot
of properties of the typical Broadcom transaction, but the one I’d say difference is the price.
But you should expect we will continue to be acquisitive and we will mostly do companies that
are in sort of that sweet spot for us, so of near revenue or pre-revenue kind of deals.
<Q — Ross Seymore — Deutsche Bank Securities, Inc.>: Great, I think we are right on
time. Unless there’s one last question, we’ll wrap it up and Scott and Ron thank you and
congratulations.
Scott A. McGregor, President, Chief Executive Officer & Director
Thank you very much.
Ronald Steven Jankov, President, Chief Executive Officer & Director, Netlogic Microsystems, Inc.
Thank you.
Disclaimer
The information herein is based on sources we believe to be reliable but is not guaranteed by us
and does not purport to be a complete or error-free statement or summary of the available data. As
such, we do not warrant, endorse or guarantee the completeness, accuracy, integrity, or timeliness
of the information. You must evaluate, and bear all risks associated with, the use of any
information provided hereunder, including any reliance on the accuracy, completeness, safety or
usefulness of such information. This information is not intended to be used as the primary basis of
investment decisions. It should not be construed as advice designed to meet the particular
investment needs of any investor. This report is published solely for information purposes, and is
not to be construed as financial or other advice or as an offer to sell or the solicitation of an
offer to buy any security in any state where such an offer or solicitation would be illegal. Any
information expressed herein on this date is subject to change without notice. Any opinions or
assertions contained in this information do not represent the opinions or beliefs of FactSet
CallStreet, LLC. FactSet CallStreet, LLC, or one or more of its employees, including the writer of
this report, may have a position in any of the securities discussed herein.
THE INFORMATION PROVIDED TO YOU HEREUNDER IS PROVIDED “AS IS,” AND TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW, FactSet CallStreet, LLC AND ITS LICENSORS, BUSINESS ASSOCIATES AND SUPPLIERS
DISCLAIM ALL WARRANTIES WITH RESPECT TO THE SAME, EXPRESS, IMPLIED AND STATUTORY, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY,
COMPLETENESS, AND NON-INFRINGEMENT. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER
FACTSET CALLSTREET, LLC NOR ITS OFFICERS, MEMBERS, DIRECTORS, PARTNERS, AFFILIATES, BUSINESS
ASSOCIATES, LICENSORS OR SUPPLIERS WILL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOST PROFITS OR
REVENUES, GOODWILL, WORK STOPPAGE, SECURITY BREACHES, VIRUSES, COMPUTER FAILURE OR MALFUNCTION,
USE, DATA OR OTHER INTANGIBLE LOSSES OR COMMERCIAL DAMAGES, EVEN IF ANY OF SUCH PARTIES IS ADVISED
OF THE POSSIBILITY OF SUCH LOSSES, ARISING UNDER OR IN CONNECTION WITH THE INFORMATION PROVIDED
HEREIN OR ANY OTHER SUBJECT MATTER HEREOF.
The contents and appearance of this report are Copyrighted FactSet CallStreet, LLC 2011. CallStreet
and FactSet CallStreet, LLC are trademarks and service marks of FactSet CallStreet, LLC. All other
trademarks mentioned are trademarks of their respective companies. All rights reserved.
www.CallStreet.com • 1-877-FACTSET • Copyright © 2001-2011 CallStreet 10
Cautions Regarding Forward-Looking Statements
All statements included or incorporated by reference in this transcript, other than statements or
characterizations of historical fact, are forward-looking statements within the meaning of the
federal securities laws, including the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on our current expectations, estimates and projections about
our industry and business, management’s beliefs, and certain assumptions made by us, all of which
are subject to change. Forward-looking statements can often be identified by words such as
“anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,”
“will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and
variations or negatives of these words. Examples of such forward-looking statements include, but
are not limited to, references to the impact of the acquisition on Broadcom’s earnings per share,
the expected date of closing of the transaction, the strategic fit of NetLogic Microsystems’
technology into Broadcom’s business, and the potential benefits of the merger. These
forward-looking statements are not guarantees of future results and are subject to risks,
uncertainties and assumptions that could cause our actual results to differ materially and
adversely from those expressed in any forward-looking statement.
Important risk factors that may cause such a difference for Broadcom in connection with the
acquisition of NetLogic Microsystems include, but are not limited to unexpected variations in
market growth and demand for multi-core network processor and related technologies, matters arising
in connection with the parties’ efforts to comply with and satisfy applicable regulatory clearances
and closing conditions relating to the transaction and closing conditions relating to the
transaction, the risks inherent in acquisitions of technologies and businesses, including the
timing and successful completion of technology and product development through volume production,
integration issues, costs and unanticipated expenditures, changing relationships with customers,
suppliers and strategic partners, potential contractual, intellectual property or employment issues
and charges resulting from purchase accounting adjustments or fair value measurements.
Broadcom’s Annual Report on Form 10-K for the year ended December 31, 2010, subsequent Quarterly
Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange
Commission filings discuss the foregoing risks as well as other important risk factors that could
contribute to such differences or otherwise affect our business, results of operations and
financial condition. The forward-looking statements in this transcript speak only as of this date.
Broadcom undertakes no obligation to revise or update publicly any forward-looking statement to
reflect future events or circumstances.
Additional information about the Merger and Where to Find It
In connection with the proposed transaction, NetLogic Microsystems intends to file a definitive
proxy statement and other relevant materials with the SEC. Before making any voting decision with
respect to the proposed transaction, stockholders of NetLogic Microsystems are urged to read the
proxy statement and other relevant materials because these materials will contain important
information about the proposed transaction. The proxy statement and other relevant materials, and
any other documents to be filed by NetLogic Microsystems with the SEC, may be obtained free of
charge at the SEC’s website at www.sec.gov or from NetLogic Microsystems’ website at
www.netlogicmicro.com or by contacting NetLogic Microsystems Investor Relations at:
investors@netlogicmicro.com. Investors and security holders of NetLogic Microsystems are urged to
read the proxy statement and the other relevant materials when they become available before making
any voting or investment decision with respect to the proposed merger because they will contain
important information about the merger and the parties to the merger.
NetLogic Microsystems and Broadcom and each of their respective executive officers, directors and
other members of their management and employees, under SEC rules, may be deemed to be participants
in the solicitation of proxies from NetLogic Microsystems’ stockholders in favor of the proposed
transaction. A list of the names of NetLogic Microsystems’ executive officers and directors and a
description of their respective interests in NetLogic Microsystems are set forth in NetLogic
Microsystemss annual report on Form 10-K for the fiscal year ended December 31, 2010, the proxy
statement for NetLogic Microsystems 2011 Annual Meeting of Stockholders and the proxy statement and
other relevant materials filed with the SEC in connection with the merger when they become
available. Certain executive officers and directors of NetLogic Microsystems have interests in the
proposed transaction that may differ from the interests of stockholders generally, including
benefits conferred under retention, severance and change in control arrangements and continuation
of director and officer insurance and indemnification. These interests and any additional benefits
in connection with the proposed transaction will be described in the proxy statement relating to
the merger when it becomes available. Investors and security holders may obtain more detailed
information regarding the names, affiliations and interests of certain of Broadcom’s executive
officers and directors by reading Broadcom’s proxy statement for its 2011 Annual Meeting of
Shareholders.