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Broadcom Drops After Dumping Head of Server Chips

At Wedbush Morgan, David Wu slapped a "sell" rating on the stock, downgrading it from a hold rating. "Our fear is that the majority of the top technical design architects who have been close to the founder will leave with him, which should hurt Broadcom's revenues and earnings beyond the current first quarter (most likely beginning in the second half of 2003, as we believe design wins for the second quarter are mostly determined now)."

Wedbush hasn't done recent banking for Broadcom.

Many ServerWorks employees are loyal to co-founder Vegesna, besides, Broadcom has the reputation of underpaying its employees in cash compensation, said Wu.

He estimates ServerWorks owns around 80% of the server chipset market today, but notes that Intel has been winning designs and aggressively competing with new chipset generations due to roll out next year.

Intel will "take advantage of this opportunity to gain share from the major PC OEMs by creating fear, uncertainty, and doubt about ServerWorks future product roadmap," Wu concluded.

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