Feb 5, 2014

Tweet SAN JOSE, Calif. — Broadcom Corp. made it official Wednesday (Feb 3) it is spending $123 million to acquire startup Teknovus Inc. (Petaluma, Calif.) for its Ethernet passive optical networking technology chipsets and software. "Today Broadcom has switching, DSL, GPON, and cable solutions in the service provider segment that span from the access to the core of the network," said Martin Lund, general manager of Broadcom's network switching group, speaking in a press release. "Teknovus' products will add a key element to our existing service provider offering that will enable us to better serve our customers in this segment," he said. According to the Dell'Oro Group, the Asia Pacific PON market is expected to grow from 22.8 million to 94.5 million subscribers by 2014. EPON represents approximately 94 percent of the fiber-to-the-home or neighborhood connections in the Asia Pacific region, Broadcom said. Broadcom will pay cash for Teknovus with a portion of the $123 million price placed into escrow subject to undisclosed terms of the agreement. Broadcom expects that the acquisition will be neutral to earnings per share in 2010. The boards of directors of the two companies have approved the merger. The closing, which is expected to occur in the first or second quarter of this year, remains subject to regulatory review. Earlier this week , Broadcom and Cavium Networks were rumored to be considering an acquisition of Teknovus. The official word comes just a day after Marvell announced its entry into PONs with four highly integrated SoCs after quietly acquiring in March GPON specialist Iamba Networks. To date relatively small companies such as Teknovus have dominated the growing PON market, led by PMC-Sierra which commands about half the chip market estimated at about $140 million in 2008 by market watcher The Linley Group. The acquisition comes the same day Broadcom reported record quarterly revenues of $1.343 billion, an increase of 7.1 percent over its prior quarter and 19.2 percent over the same quarter a year ago. Net income for the quarter was $59.2 million and $4.490 billion for the year. Annual profits were up 3.6 percent over the prior year. "In the midst of one of the worst economic downturns, Broadcom gained market share, achieved record quarterly revenue and delivered the strongest cash flow from operations in our history," said Broadcom chief executive Scott A. McGregor in a press statement.