Broadcom Offers Stock Option Exchange Program for Employees

4/8/2003 - Broadcom Corporation (Nasdaq: BRCM), the leading provider of integrated circuits enabling broadband communications, announced a program offering a voluntary stock option exchange for its employees. The offer is designed to help Broadcom retain and incentivize employees, with the aim of enhancing value for all shareholders.

In designing the program, Broadcom carefully weighed the interests of its employee equity holders and its non-employee shareholders, crafting an approach intended to benefit both groups. Employees benefit through a combination of immediate liquidity and the potential for longer-term financial reward, while all shareholders benefit as employees are retained, ensuring continuity and focus on Broadcom’s business objectives. Additionally, shareholders should gain from the potentially significant reduction in the total number of fully diluted shares outstanding, commonly referred to as the stock option “overhang”.

“We believe that our program creates a winning approach for our employees as well as our non-employee shareholders,” said Alan E. “Lanny” Ross, Broadcom’s President and CEO. “Our employees, who have a significant equity interest in Broadcom, win through immediate and potentially long-term financial reward for their hard work and competitive drive. We believe the combination of employee retention and reduced overhang provide our shareholders with the greatest potential value in the long run. Together, we all win as Broadcom is able to retain and motivate our most important asset, our employees.”

Under the program, eligible employees holding options to purchase Broadcom common stock with exercise prices per share of $23.58 or more will be given the opportunity to exchange those options for a number of new shares or new options based on formulas set forth in the Offer. Each eligible employee can exchange vested options for a lesser number of freely tradeable shares of Broadcom Class A common stock, and can exchange unvested options for an equal or lesser number of new options. The exact number of new shares and new options issuable in exchange for old options will depend on the exercise price of the old options. In general, the higher the exercise price of the old options, the fewer new shares that will be issued and the fewer new options that will be granted.

The new shares to be issued in exchange for vested options will be issued on or one business day after Broadcom accepts the tendered vested options for exchange and cancellation. The issuance will occur no earlier than May 5, 2003. The new options to be issued in exchange for unvested options will be granted no sooner than six months and one day after acceptance of the tendered unvested options for exchange and cancellation. The exercise price of the new options will be the last reported trading price of Broadcom Class A common stock on their grant date.

A total of 57 million options are eligible for participation in this program. This includes 35 million vested options which could be exchanged for up to a maximum of 13 million new shares of Broadcom Class A common stock, and 22 million unvested options which could be exchanged for the grant at least six months and one day later of 21 million new options. Thus, if employees exchange all eligible options, the net option overhang would be reduced by 23 million shares. All of the foregoing numbers are approximate.

In connection with the Offer, Broadcom expects to incur an estimated non-cash charge of up to approximately $238 million in the quarter ending June 30, 2003. The actual amount of the charge will depend upon the actual number of eligible options tendered and accepted for exchange for new shares and new options. The $238 million maximum charge reflects approximately $163 million of stock-based compensation for the issuance of the vested shares and approximately $75 million for the immediate acceleration of amortization of deferred compensation for options previously assumed by Broadcom in connection with its acquisitions of certain businesses. In recent prior quarters, the latter amount has been amortized at an approximate rate of $16 million per quarter; this amortization will cease for eligible assumed options tendered and accepted for exchange.

In addition to the non-cash charges, Broadcom will incur associated employer payroll taxes and professional fees in connection with the Offer. Employees will be responsible for covering their portion of the payroll taxes, either through direct cash payment to Broadcom or through the sale of a portion of their new shares.

Broadcom is filing today a tender offer statement with the Securities and Exchange Commission (SEC) that will provide additional information concerning the stock option exchange program, including the detailed terms and conditions thereof. The terms and conditions of the program are subject to change prior to or during the offering period, and the offering period may be extended by Broadcom in its discretion.

About Broadcom
Broadcom Corporation is the leading provider of highly integrated silicon solutions that enable broadband communications and networking of voice, video and data services. Using proprietary technologies and advanced design methodologies, Broadcom designs, develops and supplies complete system-on-a-chip solutions and related hardware and software applications for every major broadband communications market. Our diverse product portfolio includes solutions for digital cable and satellite set-top boxes; cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan, wide area and storage networking; home and wireless networking; cellular and terrestrial wireless communications; Voice over Internet Protocol (VoIP) gateway and telephony systems; broadband network processors; and SystemI/OTM server solutions. These technologies and products support our core mission: Connecting everything®.

Broadcom is headquartered in Irvine, Calif., and may be contacted at 1-949-450-8700 or at

Broadcom®, the pulse logo, Connecting everything®, and SystemI/OTM are trademarks of Broadcom Corporation and/or its affiliates in the United States and certain other countries.

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