Broadcom Drops After Dumping Head of Server Chips
Shares of Broadcom (BRCM) took it on the chin today after the company abruptly replaced the head of its server chip unit, citing arguments over strategy.
The news prompted two analysts to downgrade their ratings on the stock, saying the top-level dismissal could lead to other departures and give Intel (INTC) an edge in the server chipset business.
In midafternoon trading, Broadcom stock fell $2.24, or 14.5%, to $13.16. Volume was heavy, at 28 million shares, or more than three times the normal trading. On a day that many tech stocks ebbed into the red, Intel was off slightly, down 21 cents, or 1.2%, to $17.68.
After the close Wednesday, the communications chipmaker said it will replace Raju Vegesna, the head of its ServerWorks subsidiary. Vegesna was co-founder and CEO at the time Broadcom acquired the unit in 2001. In an unusually blunt statement, CEO Alan "Lanny" Ross noted disagreements between management at Broadcom and ServerWorks "over a number of operational issues and the strategic direction of ServerWorks and how the business fits into Broadcom's long-term plans."As a successor to Vegesna, Broadcom tapped Duane Dickhut, leader of Broadcom's broadband processor unit. The ServerWorks subsidiary, which makes server chips, accounts for about a quarter of Broadcom's revenue and profits. Wall Street reacted to the sudden management change with concern, particularly because it comes after other worrisome events at Broadcom. Since January, rattled investors have witnessed the
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