BROADCOM CORPORATION 2009 Annual Report Everything ®
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BO7523 3/2/10 10:15 AM Page c BROADCOM CORPORATION 2009 Annual Report Connecting everything® BO7523 3/2/10 10:15 AM Page d Broadcom’s innovative products and technologies enable people to connect – locally and globally – for business, for fun, at home, at the office and on the move. OUR THREE MAJOR TARGET MARKETS Home: Broadband Communications Infrastructure: Enterprise Networking Hand: Mobile & Wireless ABOUT BROADCOM Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications. Broadcom products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. We provide the industry’s broadest portfolio of state-of-the-art system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. These solutions support our core mission: Connecting everything®. Broadcom, one of the world's largest fabless communications semiconductor companies, with 2009 revenue of $4.49 billion, holds more than 3,800 U.S. and 1,550 foreign patents, and has more than 7,800 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video, data and multimedia. A Fortune 500® company, Broadcom is headquartered in Irvine, California, and has offices and research facilities in North America, Asia and Europe. Broadcom Class A shares trade on the Nasdaq Global Select MarketSM under the symbol BRCM. BO7523 3/2/10 10:15 AM Page 1 To Our Shareholders By virtually any measure, 2009 was an extraordinary year. Following are some of the highlights from 2009 and early It began inauspiciously in the wake of a global economic 2010 in our three target markets: meltdown and perhaps the steepest and most rapid decline in the technology industry ever experienced. Yet, Home: Broadband Communications Products from its very ominous beginnings, 2009 turned out to be Broadcom remained committed to enabling global service one of Broadcom’s strongest years ever. We delivered providers and consumer electronics companies to deliver industry-leading products which enabled us to gain market digital entertainment, communication and information share, return to record quarterly revenue in our fourth quarter, content to and throughout the home, providing consumers and generate the strongest quarter and year of cash flow with an exciting digital home experience. In all three from operations in the company’s history. broadband market segments (set-top box, broadband access and consumer electronics), Broadcom delivered Our ‘hunker down’ strategy in 2009 focused on protecting leading-edge technology to support advanced applications cash flow while ensuring that our research and development and services while reducing overall cost, complexity and dollars were invested in the right areas to drive market power requirements. share gains. We also instituted an approximately $100 million cost reduction program in support of these goals. As As the growth in Internet Protocol (IP) video surged, the year progressed, we saw signs of recovery in the global consumer demand increased for ultra high-speed Internet economy and in our end markets, and re-focused our access, and Broadcom met this demand by providing next long-term efforts toward profitability. generation DOCSIS®/Euro-DOCSIS™ 3.0-based cable modem and cable modem termination systems (CMTS), From the legal perspective, we achieved a number of VDSL and gigabit passive optical network (GPON) solutions important milestones in 2009 including the settlement of that improve last-mile bandwidth to customers for even our longstanding legal dispute with Qualcomm, in which faster broadband speeds. they agreed to pay Broadcom $891 million. We also reached a settlement with our insurance carriers netting an additional To address the next evolution of digital home connectivity, we $63 million in the fourth quarter, and reached an agreement continue to deliver products that incorporate Multimedia in principle with the class action plaintiffs to settle an over Coax Alliance (MoCA®) and the Digital Living Network outstanding suit. In addition, as a recognized FORTUNE Alliance (DLNA®) technologies. These technologies enable 500® global leader in the semiconductor industry and in whole-home connectivity and multi-room DVR capabilities, line with the social responsibilities that arise from that role, as well as exciting new ways for users to connect, share we announced the establishment of the Broadcom and enjoy digital content on multiple screens throughout Foundation. With a grant of $50 million, the Foundation the home. will focus on supporting math and science education programs as well as community initiatives in the regions In 2009, Broadcom also saw continued momentum for ® of the world where our employees work and live. Internet-connected televisions and Blu-ray Disc players that offer interactive content and Internet-based instant We also continued to build our broad patent portfolio streaming applications for a new way to enjoy the latest with more than 5,350 U.S. and foreign patents issued and generation of HDTVs, which are fast becoming the hub for more than 7,800 additional pending patent applications. entertainment and information in the home. Broadcom is Additionally, we continued to build our portfolio of com- also addressing the expanding worldwide digital TV transition mercial 65 nanometer products that provide our customers with customized solutions following the U.S. government’s the features of smaller size and lower power, and we made successful analog broadcast TV shut-off program. good progress in further transitioning to 40 nanometer products that included our first samplings in late 2009. As we closed out 2009, and entered 2010, a true indicator of Broadcom’s financial strength and optimism for the future was our decision to initiate a quarterly dividend to our shareholders, which we consider a major milestone in the company’s growth as we continue our efforts to adopt shareholder friendly initiatives. We continue to look ahead to a new decade of exciting communications possibilities and unprecedented levels of connectivity, as rich multimedia, video, data and voice Scott A. McGregor content will be shared across billions of devices globally. These trends play right into our broad technology portfolio and core capabilities gathered and built over two decades. We are in the right markets with the products that continue to enable the communications and connectivity revolution. BO7523 3/2/10 10:15 AM Page 2 Infrastructure: Enterprise Networking Products For our mobile phone business, 2009 was a watershed year. Broadcom expanded its Ethernet product portfolio and We saw increased adoption of our GPS and Wi-Fi chips in demonstrated new ways in which Ethernet connectivity will mobile phones and impressive sales traction to the world’s be applied in new market segments. As energy efficiency two largest cellular handset makers, further validating became an even more important issue in computing and years of investment in cellular technologies and products. networking in 2009, Broadcom introduced new products Our EDGE and 3G baseband platforms ramped significantly compliant with the IEEE P802.3az Energy Efficient Ethernet as our customers shipped some of the world’s most popular, draft standard. Similarly, we announced design wins for our high volume phones built around our platforms. In addition low power small-to-medium-sized business (SMB) ‘green’ to cellular baseband, connectivity, RF and PMU technologies, switch products and our ‘green’ TruManage™ controllers Broadcom also supplies advanced mobile multimedia for enterprise-class PCs. Broadcom is also addressing processing that is strategically important for next generation the emergence of the IEEE AV Bridging standard being HD video recording. adopted by audio/video equipment makers, whereby Ethernet connectivity is modified to accommodate In closing, I believe that the long-term planning approaches the stringent quality of service (QoS) requirements of that we have undertaken, and the steps we took during professional A/V equipment. tough economic times, have put us in a very good position In service provider networks, Ethernet connectivity is the for the rest of 2010 and into 2011, when Broadcom will technology of choice to replace older and more expensive mark its 20th anniversary. legacy telecom technologies. In 2009, Broadcom delivered While we modified our financial strategy early last year to a new family of Ethernet switch products to service provider weather challenging economic times, the formula for our networks and realized growth in this segment. long-term success hasn’t changed. That formula includes As a proponent of convergence over Ethernet for years, building one of the industry’s broadest intellectual property Broadcom announced new support for iSCSI and Fibre portfolios to enable wired and wireless communication and Channel over Ethernet (FCoE) in our NetXtreme II® connectivity devices within the home, hand, and in the Ethernet converged network interface controllers (C-NICs) infrastructure backbone; maintaining financial discipline to address the rapidly increasing storage traffic in data and strong cash flow; dedicating ourselves daily to superior center and enterprise networks. engineering execution; and providing our customers with a robust product