Broadcom-Emulex: Cute little back story

May 5, 2009

rtxe6z2The Broadcom-Emulex saga seems to be unfolding by the book. Quick recap of the story so far: On April 21, Broadcom disclosed an all-cash, $764 million offer for Emulex. Emulex mulled it over for some days and rejected it yesterday. Today, Broadcom turned hostile by taking its offer directly to shareholders. In response, Emulex advised shareholders to take no action. Over to you, Broadcom.

Meanwhile, it turns out the two companies have some history. In its rejection letter, Emulex pointed out loud and clear that Broadcom’s move was opportunistically timed, and designed to take advantage of new unannounced contracts Emulex had won recently for its network convergence products — information it said Broadcom was “uniquely” aware of.

Emulex CEO Jim McCluney told Reuters that his company won several design contracts away from Broadcom, which makes chips for Ethernet storage products. Broadcom’s bid stems from those contract wins, he said.

Now, Emulex uses chips from a company called ServerEngines for its own Ethernet products that compete with Broadcom’s offerings, according to analysts.

ServerEngines was founded in 2004 by a group of ex-Broadcom engineers who had originally come on board Broadcom in 2001, when the chipmaker bought the company they had then built, called ServerWorks.

Broadcom bought ServerWorks for $1.8 billion and its executives joined the company as part of the deal. But ServerWorks founder Raju Vegesna left Broadcom in 2003 under what analysts described as “strained” conditions. Vegesna is now CEO of ServerEngines.

And now, Broadcom wants to buy Emulex even at the cost of a hostile, pitched battle. Perhaps they should remember the popular Silicon Valley adage that traditionally made hostile takeovers anathema for tech companies: when you buy a company that doesn’t want to be bought, its assets (read engineers) can walk out the door.

(Additional reporting by Sinead Carew)

Photo: Reuters

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see