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The History of Computing

199 EpisodesProduced by Charles EdgeWebsite

Computers touch all most every aspect of our lives today. We take the way they work for granted and the unsung heroes who built the technology, protocols, philosophies, and circuit boards, patched them all together - and sometimes willed amazingness out of nothing. Not in this podcast. Welcome to th… read more


Broadcom and Avago

Welcome to the History of Computing Podcast, where we explore the history of information technology. Because understanding the past prepares us for the innovations of the future! Todays episode is on the History of chip-maker Broadcom. This is actually two stories. The first starts with a movement called fabless semiconductors. LSI had been part of Control Data Corporation and spun off to make chips. Kickstarted by LSI in the late sixties and early seventies, fabless companies started popping up. These would have what are known as foundries make their chips. The foundries didn’t compete with the organizations they were making chips for. This allowed the chip designers to patent, design, and sell chips without having to wield large manufacturing operations. Such was the state of the semiconductor industry when Henry Nicholas met Dr Henry Samueli while working at TRW in the 1980s. Samueli had picked up an interest in electronics early on, while building an AM/FM radio in school. By the 80s he was a professor at UCLA and teamed up with Nicholas, who was a student as well, to form Broadcom in 1991. They began designing integrated circuit (also referred to as a microchip). These are electronic circuits on a small flat piece (or "chip") of semiconductor material, usually silicon. Jack Kilby and Robert Noyce had been pioneers in the field in the late 50s and early 60s and by the 80s, there were lots and lots of little transistors in there and people like our two Henry’s were fascinated with how to shove as many transistors into as small a chip as possible. So the two decided to leave academia and go for it. They founded Broadcom Corporation, Henry Nicholas’ wife made them a logo and they started selling their chips. They made chips for power management, memory controllers, control units, and early mobile devices. But most importantly, they made chips for wi-fi. Today, their chips provide the chips for most every Apple device sold. They also make chips for use in network switches, are responsible for the raspberry pi and more. Samueli holds over 70 patents on his own, although in-all Broadcom has over 20,000, many in mobile, internet of things, and data center! By 1998 sales were good and Broadcom went public. In 2000, UCLA renamed the school of engineering to the Henry Samueli School of Engineering. Nicholas retired from Broadcom in 2003, Samueli bought the Anaheim Ducks in 2005. They continued to grow, make chips, and by 2009 they hit the Fortune 500 list. They were purchased by Avago Technologies in 2016. Samueli became the Chief Technology officer of the new combined company. Wait, who’s Avago?!?! Avago started in 1961 as the semiconductor division of Hewlett-Packard. In the 60s they were pioneers in using LEDs in displays. They moved into fiber in the 70s and semiconductors by the 90s, giving the world the optical mouse and cable modems along the way. They spun out of HP in 99 as part of Agilent and then were acquired from there to become Avago in 2005, naming Hock Tan as CEO. The numbers were staggering. Not only did they ship over a billion optical mouse chips, but they also pushed the boudoirs of radio frequency chips, enabling industries like ATMs and cash registers but also gave us IR on computers as a common pre-bluetooth way of wirelessly connecting peripherals. They were also key in innovations giving us wifi+bluetooth+fm combo chips for phones, pushing past the 100Gbps transfer speeds for optical and doing innovative work with touch screens. Their 20,000 patents combined with the Broadcom patents give them over 40,000 patents in just those companies. They went public in 2009 and got pretty good at increasing revenue and margins concurrently. By 2016 they went out and purchased Broadcom for $37 Billion. They helped Broadcom diversify the business and kept the name. They bought Brocade for $5.9B in 2017 and CA for $18.9 billion in 2018. Buying Symantec in 2019 bumps the revenue of Broadcom up from $2.5 billion to 24.6 billion and EBITDA margins from 33 percent to 56 percent. The aggressive acquisitions caught the eyes of Donald Trump who shut down a $117 billion dollar attempted takeover of Qualcomm, a rival of both the old Broadcom and the new Broadcom. Broadcom makes the Trident+ chips, the network interface controllers used in Dell PowerEdge blade servers, the systems on a chip used in the raspberry pi, the wifi chipsets used in the Nexus, the wifi + bluethooth chips used in every iPhone since the iPhone 3GS, the Jericho chip, the tomahawk chip. They employ some of the best chip designers of the day, including Sophie Wilson who designed the instruction set for an early RISC processor and designed the ARM chip in the 80s when she was at Acorn. Ultimately cash is cheap these days. Broadcom CEO Hock Tan has proven he can raise and deploy capital quickly. Mostly building on past successes in go-to-market infrastructure. But, if you remember from our previous episode on the history of Symantec, that’s exactly what Symantec had been doing when they became a portfolio company! But here’s the thing. If you acquire companies and your EBITDA drops, you’re stuck. You have to increase revenues and reduce EBITDA. If you can do that in Mergers and Acquisitions, investors are likely to allow you to build as big a company as you want! With or without a unified strategy. But the recent woes of GE should be a warning. As you grow, you have to retool your approach. Otherwise, the layers upon layers of management begin to eat away at those profits. But you dig too far into that and quality suffers, as Symantec learned with their merger and then demerger with Veritas. Think about this. CA is strong in Identity and Access Management, with 1,500 patents. Symantec is strong in endpoint, web, and DLP security, with 3,600 patents. Brocade has over 900 in switching and fiber in the data center. The full device trust and reporting could, if done properly go from the user to the agent on a device to the data center and then down to the chip in a full zero trust model. Or Broadcom could just be a holding company, sitting on around 50,000 patents and eeking out profit where they can. Only time will tell. But the lesson to learn from the history of both of these companies is that if you’re innovating, increasing revenues and reducing EBITDA, you too can have tens of billions of dollars, because you’ve proven to be a great investment.

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