Mark LaPedus EE Times (02/03/2010 4:42 PM EST)

SAN JOSE, Calif. -- Broadcom Corp. has signed a definitive agreement to acquire Teknovus Inc. (Petaluma, Calif.), a passive optical networking (PON) firm.

Broadcom (Irvine, Calif.) expects to pay approximately $123 million to acquire all of the outstanding shares of capital stock and other rights of Teknovus.

As reported, chatter in the rumor mill this week said Broadcom or Cavium Networks may acquire startup Teknovus. Speculation is heating up as Marvell is expected to roll out its first PON products this week. Ethernet passive optical networking (EPON) is a technology providing broadband services at up to 10 Gigabits per second over fiber optic cables.

The moves come as carriers are increasingly looking at PON technology as a way to leapfrog each other by delivering fast optical connections to the home as an alternative to copper-based digital subscriber lines. Infonetics Research estimates the worldwide market for PON systems will hit $4.5 billion in 2013 driven by IPTV systems such as those of AT&T and Verizon.

As a result, Broadcom is moving into the area. "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, senior vice president and general manager of Broadcom's network switching line of business, in a statement. ''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."

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 the satisfaction of regulatory requirements and other customary closing conditions.

Broadcom also reported unaudited financial results for its fourth quarter and year ended Dec. 31, 2009. Net revenue for the fourth quarter of 2009 was a record $1.343 billion. This represents an increase in net revenue of 7.1 percent compared with the $1.254 billion for the third quarter of 2009 and an increase of 19.2 percent compared with the $1.127 billion for the fourth quarter of 2008.

Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2009 was $59.2 million, or $0.11 per share (diluted), compared with GAAP net income of $84.6 million, or $0.16 per share (diluted), for the third quarter of 2009, and GAAP net loss of $159.2 million, or $0.32 net loss per share (basic and diluted), for the fourth quarter of 2008.

Net revenue for the year was $4.490 billion. This represents a decrease in net revenue of 3.6 percent from the $4.658 billion reported for the year ended Dec. 31, 2008. GAAP net income for the year ended Dec. 31, 2009 was $65.3 million, or $0.13 per share (diluted), compared with $214.8 million, or $0.41 per share (diluted), for the year ended December 31, 2008.

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