[Engineering Feature]
Key Companies Shake Up This Year's Top Employers
It’s a tough time for the industry, but several companies have grown and even thrived despite the recession. A closer look beyond the numbers shows how they achieved their success.
IIt’s been a rocky year, with unprecedented layoffs and even company closures. Few employees, from executives down to entry-level engineers, feel secure in their jobs. But some companies did see success in 2008, as indicated by our annual survey of the Top 50 Employers in Electronic Design.
For the sake of objectivity, our survey focused on available financial data of publicly traded companies. Our calculations drew from numbers like employee growth, sales growth, number of patents, stock price, and R&D budget, including bonus points for firms that did well in our 2008 Reader Survey. (For a look at our process, see “The Methodology Behind Our Choices”)
The leading companies should be no surprise. Apple topped the list for the third year in a row, followed by repeat entries from the likes of Cisco Systems, Microsoft, Juniper Networks, and Seagate Technology (see the table). These companies weathered the storms and are positioning themselves for growth in 2009.
Yet the real story lies not in the companies that held the line but in those that thrived. Adtran, Altera, Broadcom, Eaton, and Pitney Bowes all saw huge gains on our list, moving up by 40 or 50 places each between 2007 and 2008. What did these companies have that so many others didn’t—and how can your firm replicate their success? It comes down to key markets, like telecommunications and power, and smart management.
BROADCOM MAKES ITS MOVE Based in Irvine, Calif., Broadcom surged 59 slots up our list, vaulting from 66 in 2007 to seven in 2008. Considering the current telecom boom, driven by “triple-play” services and smart phones, that’s no surprise. In fact, it’s no wonder this manufacturer of semiconductors for wired and wireless communications stands by its core mission statement: “Connecting Everything.”
Broadcom’s products enable the delivery of voice, video, data, and multimedia to and throughout the home, the office, and mobile environments (Fig. 1). The company claims the industry’s broadest portfolio of state-of-the-art system-on-a-chip (SoC) and software solutions, which it sells to makers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices.
It also is one of the world’s largest fabless semiconductor companies, with more than 3100 U.S. and 1400 foreign patents and more than 7600 additional patent-pending applications. This gives Broadcom one of the broadest intellectual-property (IP) portfolios in the industry (ranked in the top five) and provides a major competitive advantage. Its three major target markets are broadband communications, mobile and wireless, and enterprise networking.
Broadcom did well in a broad range of criteria, scoring a five or higher in virtually all categories as well as two points or more improvement in sales growth, pretax income growth, pretax income margin improvement, year-over-year change in patents issued, and ratio of closing stock price to high stock price. The company also received four bonus points based on the 2008 Electronic Design Reader Survey.
Broadcom’s diverse products can be found in digital cable, satellite, and IP set-top boxes, media servers, high-definition TVs and DVD players, cable and DSL modems, wireless local-area networks (WLANs), cell phones, and mobile multimedia devices such as video iPods. One of its specialties is chip integration, or the placement of multiple functions on one chip, providing endto- end solutions for its customers.
The company sits in a sweet spot given the ever increasing demand for chips. Almost every semiconductor that the company makes is used for broadband Internet or wireless phones, two consistently growing markets. A large part of the potential upside for the company comes from Broadcom’s plan to push into the wireless space, where the company gets just 5% of its revenues.
Already, the Bluetooth and Wi-Fi in Apple’s iPhone use Broadcom chips, and so do handsets made by Nokia and Samsung. Verizon uses Broadcom’s 3G solution, and 3G services remain a huge growth opportunity.
In the broadband segment, the company is the leader in Ethernet semis, with greater than 40% market share. Broadcom also is the number-one semi provider for cable set-top boxes and WLAN equipment, and it is number two in satellite set-top boxes.
Both from a technology and growth perspective, the “combo” wireless chips introduced in 2008 have major potential. These chips combine different functions such as Bluetooth, Wi-Fi, FM radio, and GPS on one chip. This is a huge cost-saving proposition, and it has not been widely adopted.
According to Broadcom, only 5% of smart phones use combo chips for Bluetooth, WLAN, and FM, but the company expects that figure to reach 75% in the next three to four years. Broadcom believes these chips and associated software solutions have the potential to contribute 10% of 2009 total sales, based on the customer interest it has seen.
Broadcom’s 2008 acquisition of Advanced Micro Devices’ digital TV (DTV) business now enables it to offer a complete DTV product line covering all market segments. Emulex, which makes controller chips, adapters, blades, and connectivity solutions for the corporate data center, has rejected a hostile takeover attempt by Broadcom. If they can reach a deal, it will mean more upside in this space for Broadcom.
Risks include recessionary cycles and slowdowns in its enduser markets, although these markets appear to continue to show rapid growth. And while its fabless model has several advantages, it also limits control over delivery schedules and production costs and methods, even though a standard CMOS process is used. The Asian foundries Broadcom uses have suffered from earthquakes and power outages, and pandemics are always a labor concern.
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