Broadcom CEO On Cisco Silicon One: ‘We’ll Welcome The Competition’

‘The fact that Cisco is joining it we now feel validates the model, the trend we have been pushing. And it’s great to see that we’re right yet again. So we’ll welcome the competition,’ says Broadcom CEO Hock Tan.

Broadcom CEO Hock Tan said this week’s introduction of the Cisco Silicon One high-performance networking chip validates the semiconductor giant’s laser-like focus on disaggregation.

“The fact that Cisco is joining it we now feel validates the model, the trend we have been pushing,” Tan told investors Thursday during the company’s earnings call. “And it’s great to see that we’re right yet again. So we’ll welcome the competition.”

Cisco had been one of San Jose, Calif.-based Broadcom’s “very good customers” in the silicon space, Tan said, but that’s positioned to change now that the San Jose, Calif.-based networking titan is, for the first time, building its own silicon and making it available to third parties.

[Related: Cisco Intros Cisco Silicon One: New ASIC Play Beyond The Network Into The Cloud]

A move by Cisco to sell its chips to cloud companies would maybe “[put] a dent into Broadcom,” Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told CRN this week.

Tan, though, said that Cisco’s decision validates a couple of things Broadcom has been pushing for years. Specifically, Tan said Broadcom has held the position that there won’t continue to be this aggregation of software and the operating system from the hardware to the silicon chip that supports it. Traditionally, Tan said all of this has been wrapped into a black box as one. But that’s set to change, Tan said.

“That disaggregation path has obviously been pushed, and … we have been very successful in enabling it,” Tan said.

Tan also pointed out that the silicon chips are used not only in cloud infrastructures, but also in traditional enterprises. A couple of very large telecom providers in both North America and Europe have already using Broadcom’s Jericho 2 switch-router for more than a year to disaggregate hardware and software, according to Tan.

Since its introduction, Tan said the Jericho 2 has offered a performance of 10 terabits per second. And earlier this week, Tan said Broadcom announced that a future successor to the Jericho 2 will deliver performance of 25.6 terabits per second.

Meanwhile, Cisco said this week that the initial version of its chip, the Cisco Silicon One Q100, provides routing performance of over 10 terabits per second. And future versions of Cisco Silicon One are expected to provide performance of up to 25 terabits per second, according to the company.

Sales for the San Jose, Calif.-based company jumped to $5.78 billion in the quarter ended Nov. 3, up 6.1 percent from $5.44 billion the year prior. That edged out Seeking Alpha projections of $5.74 billion.

But net income for the quarter tumbled to $847 million, or $1.97 per diluted share, down 24 percent from $1.12 billion, or $2.64 cents per diluted share, last year. On a non-GAAP basis, net income sunk to $2.39 billion, or $5.39 per diluted share, down 6.1 percent from $2.55 billion, or $5.85 per diluted share, the year prior. That beat Seeking Alpha’s earnings per share expectation of $5.35 per share.

For the full year, sales soared to $22.6 billion, up 8.4 percent from $20.85 billion the year prior. Net income for the fiscal year ended Nov. 3, 2019, plummeted to $2.72 billion, or $6.43 per diluted share, down 78.4 percent from $12.6 billion, or $28.44 per diluted share, last year.

Broadcom’s stock dropped $4.30 (1.31 percent) to $323.50 in after-hours trading. Earnings were announced after the market closed Thursday.

On a segment basis, Broadcom’s semiconductor solution sales sunk to $4.55 billion, down 6.6 percent from $4.87 billion the year prior. Meanwhile, infrastructure software sales skyrocketed to $1.2 billion, up 133.9 percent from $513 million last year. The financial results do not include any contribution from the Symantec Enterprise Security business since the deal closed after the end of Broadcom’s fiscal year.

For the coming fiscal year, Broadcom expects EBITDA (earnings before interest, taxation, depreciation and amortization) between $13.5 billion and $14 billion on sales of between $24.5 billion and $25.5 billion.