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Why Broadcom is a Scary Competitor

Broadcom (BRCM) is a scary company to compete with. They execute aggressively and have backup plans for when they don’t. They can bring to bear ridiculous amounts of resources, and justify the profligate fixed R&D expense on any one project by targeting high volume markets.

Here’s a question from Fridays Broadcom earnings call that highlighted yet another scary Broadcom trait.

Michael Masdea – Credit Suisse

…. As you converge more and more of certain pure play companies functionality into what youre doing, what kind of competitive responses are you seeing? Do you get worried when you start to take a company’s whole livelihood away that you’re going to see some irrational sort of competition?

Scott McGregor – CEO

Well there’s always a risk. What many companies do if they feel threatened is they cut their price to try and hang onto sockets. What our strategy is with our broad IP portfolio is we do integration of all the different technologies. So we end up eliminating sockets. It’s pretty hard to compete if the socket that you’re in today has been eliminated by being integrated into a larger SOC.

I.e. if you are a niche player you should probably accept that buyout offer from Broadcom before they nuke your business.

Transcript Courtesy Seeking Alpha

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