Broadcom 10Q 2007 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2007
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number:000-23993

Broadcom Corporation

(Exact Name of Registrant as Specified in Its Charter)


California		33-0480482
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

5300 California Avenue
Irvine, California92617-3038
(Address of Principal Executive Offices) (Zip Code)

(949) 926-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one):


	þ	Large accelerated filer o Accelerated filer o Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No þ

As of June 30, 2007 the registrant had 468.1 million shares of Class A common stock, $0.0001 par value, and 71.1 million shares of Class B common stock, $0.0001 par value, outstanding.

BROADCOM CORPORATION

QUARTERLY REPORT ONFORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007

TABLE OF CONTENTS


			Page

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements		2
		Unaudited Condensed Consolidated Balance Sheets at June 30, 2007 and December 31, 2006		2
		Unaudited Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2007 and 2006		3
		Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006		4
		Notes to Unaudited Condensed Consolidated Financial Statements		5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		38
	Item 4.	Controls and Procedures		39
	Item 4T.	Controls and Procedures		40

PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings		40
	Item 1A.	Risk Factors		40
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		58
	Item 3.	Defaults upon Senior Securities		59
	Item 4.	Submission of Matters to a Vote of Security Holders		59
	Item 5.	Other Information		61
	Item 6.	Exhibits		61
EXHIBIT 31
EXHIBIT 32

Broadcom^®, the pulse logo and SystemI/O^tm are among the trademarks of Broadcom Corporationand/or its affiliates in the United States, certain other countriesand/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners.

PART I. FINANCIAL INFORMATION


Item 1.	*Financial Statements*

BROADCOM CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
	2007			2006
	(In thousands)

ASSETS
Current assets:
Cash and cash equivalents	$	2,044,337		$	2,158,110
Short-term marketable securities		370,336			522,340
Accounts receivable, net		382,285			382,823
Inventory		191,324			202,794
Prepaid expenses and other current assets		103,969			85,721

Total current assets		3,092,251			3,351,788
Property and equipment, net		228,271			164,699
Long-term marketable securities		66,116			121,148
Goodwill		1,236,488			1,185,145
Purchased intangible assets, net		39,384			29,029
Other assets		25,860			24,957

Total assets	$	4,688,370		$	4,876,766


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	303,067		$	307,972
Wages and related benefits		121,304			104,940
Deferred revenue		2,874			1,873
Accrued liabilities		258,764			263,916

Total current liabilities		686,009			678,701
Commitments and contingencies
Long-term liabilities		31,669			6,399
Shareholders’ equity:
Common stock		54			55
Additional paid-in capital		11,627,407			11,948,908
Accumulated deficit		(7,657,219	)		(7,757,202	)
Accumulated other comprehensive income (loss)		450			(95	)

Total shareholders’ equity		3,970,692			4,191,666

Total liabilities and shareholders’ equity	$	4,688,370		$	4,876,766

See accompanying notes.

BROADCOM CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2007			2006		2007			2006
	(In thousands, except per share data)

Net revenue	$	897,920		$	941,131	$	1,799,401		$	1,841,778
Cost of revenue		437,037			457,374		877,986			891,583

Gross profit		460,883			483,757		921,415			950,195
Operating expense:
Research and development		332,130			280,024		632,940			531,718
Selling, general and administrative		119,859			121,982		248,506			234,881
Amortization of purchased intangible assets		200			605		529			1,688
In-process research and development		10,200			—		10,500			5,200
Impairment of other intangible assets		—			—		1,500			—

Income (loss) from operations		(1,506	)		81,146		27,440			176,708
Interest income, net		32,904			28,194		69,912			51,932
Other income (expense), net		642			1,448		(767	)		3,219

Income before income taxes		32,040			110,788		96,585			231,859
Provision (benefit) for income taxes		(2,216	)		4,702		1,338			8,075

Net income	$	34,256		$	106,086	$	95,247		$	223,784

Net income per share (basic)	$	.06		$	.19	$	.17		$	.41

Net income per share (diluted)	$	.06		$	.18	$	.16		$	.37

Weighted average shares (basic)		540,851			547,790		544,356			543,379

Weighted average shares (diluted)		575,115			594,546		580,427			597,875

The following table presents details of total stock-based compensation expenseincludedin each functional line item in the unaudited condensed consolidated statements of income above:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(In thousands)

Cost of revenue	$	6,861	$	7,105	$	12,675	$	13,391
Research and development		90,832		86,420		169,263		156,425
Selling, general and administrative		36,607		38,940		69,233		70,635

See accompanying notes.

BROADCOM CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended
	June 30,
	2007			2006
	(In thousands)

Operating activities
Net income	$	95,247		$	223,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29,024			23,325
Stock-based compensation expense:
Stock options and other awards		165,198			181,248
Restricted stock units issued by the Company		85,973			59,203
Acquisition-related items:
Amortization of purchased intangible assets		6,145			7,413
In-process research and development		10,500			5,200
Impairment of other intangible assets		1,500			—
Loss (gain) on strategic investments, net		2,648			(700	)
Changes in operating assets and liabilities:
Accounts receivable		3,179			(100,901	)
Inventory		11,470			(82,840	)
Prepaid expenses and other assets		(16,646	)		17,747
Accounts payable		10,602			27,715
Accrued settlement liabilities		(2,000	)		(2,000	)
Other accrued liabilities		293			17,798

Net cash provided by operating activities		403,133			376,992

Investing activities
Net purchases of property and equipment		(107,379	)		(37,229	)
Net cash paid for acquisitions		(77,952	)		(67,921	)
Net proceeds from sales (purchases) of strategic investments		(3,194	)		137
Purchases of marketable securities		(457,096	)		(372,033	)
Proceeds from maturities of marketable securities		664,132			271,423

Net cash provided by (used in) investing activities		18,511			(205,623	)

Financing activities
Repurchases of Class A common stock		(641,288	)		(246,102	)
Net proceeds from issuance of common stock		105,871			477,690
Repayment of notes receivable by employees		—			2,426
Excess tax benefits from stock-based compensation		—			338
Payments on assumed debt and other obligations		—			(4,625	)

Net cash provided by (used in) financing activities		(535,417	)		229,727

Increase (decrease) in cash and cash equivalents		(113,773	)		401,096
Cash and cash equivalents at beginning of period		2,158,110			1,437,276

Cash and cash equivalents at end of period	$	2,044,337		$	1,838,372

See accompanying notes.

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007


1.	Summary of Significant Accounting Policies

The Company

Broadcom Corporation (the “Company”) is a major technology innovator and global leader in semiconductors for wired and wireless communications. The Company’s products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. The Company provides one of the industry’s broadest portfolio of state-of-the-artsystem-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. Its diverse product portfolio includes solutions for digital cable, satellite and Internet Protocol (IP) set-top boxes and media servers; high definition television (HDTV); high definition DVD players and personal video recording (PVR) devices; cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan, wide area and storage networking; SystemI/O^tm server solutions; broadband network and security processors; wireless and personal area networking; cellular communications; mobile multimedia and applications processors; mobile power management; and Voice over Internet Protocol (VoIP) gateway and telephony systems.

Basis of Presentation

The interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”)Form 10-Q and Article 10 of SECRegulation S-X. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2006, included in the Company’s Annual Report onForm 10-K filed February 20, 2007 with the SEC.

The condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position at June 30, 2007 and December 31, 2006, and the consolidated results of its operations for the three and six months ended June 30, 2007 and 2006, and its consolidated cash flows for the six months ended June 30, 2007 and 2006. The results of operations for the three and six months ended June 30, 2007 are not necessarily indicative of the results to be expected for future quarters or the full year.

Use of Estimates

The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of net revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to allowances for doubtful accounts, sales returns and allowances, warranty reserves, inventory reserves, stock-based compensation expense, goodwill and purchased intangible asset valuations, strategic investments, deferred income tax asset valuation allowances, tax contingencies, restructuring costs, litigation and other loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

The Company’s net revenue is generated principally by sales of its semiconductor products. The Company derives the remaining balance of its net revenue predominantly from software licenses, development agreements, support and maintenance agreements and cancellation fees. The majority of the Company’s sales occur through the efforts of its direct sales force. The remaining balance of its sales occurs through distributors.

The following table presents details of the Company’s revenue:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Sales of semiconductor products		99.0	%		98.5	%		99.0	%		99.0	%
Other		1.0			1.5			1.0			1.0

		100.0	%		100.0	%		100.0	%		100.0	%


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Sales made through direct sales force		85.1	%		83.0	%		85.3	%		82.6	%
Sales made through distributors		14.9			17.0			14.7			17.4

		100.0	%		100.0	%		100.0	%		100.0	%

In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101,Revenue Recognition in Financial Statements(“SAB 101”), and SAB No. 104,Revenue Recognition(“SAB 104”), the Company recognizes product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price to the customer is fixed or determinable, and (iv) collection of the resulting receivable is reasonably assured. These criteria are usually met at the time of product shipment. However, the Company does not recognize revenue until all customer acceptance requirements have been met, when applicable. A portion of the Company’s sales are made through distributors under agreements allowing for pricing creditsand/or rights of return. Product revenue on sales made through these distributors is not recognized until the distributors ship the product to their customers. The Company records reductions to revenue for estimated product returns and pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns, analysis of credit memo data, specific criteria included in rebate agreements, and other factors known at the time. The Company also maintains inventory (hubbing) arrangements with certain of its customers. Pursuant to these arrangements the Company delivers products to a customer or a designated third party warehouse based upon the customer’s projected needs, but does not recognize product revenue unless and until the customer reports that it has removed the Company’s product from the warehouse to incorporate into its end products.

In arrangements that include a combination of hardware and software products that are also sold separately, where software is more than incidental and essential to the functionality of the product being sold, the Company follows the guidance in Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) IssueNo. 03-05,Applicability of AICPA Statement of Position97-2 to Non-Software Deliverables in an Arrangement Containing More-Than-Incidental Software, accounts for the entire arrangement as a sale of software and software-related items, and follows the revenue recognition criteria in accordance with the American Institute of Certified Public Accountants Statement of Position (“SOP”)97-2,Software Revenue Recognition(“SOP 97-2”), and related interpretations.

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue under development agreements is recognized when applicable contractual milestones have been met, including deliverables, and in any case, does not exceed the amount that would be recognized using the percentage-of-completion method in accordance withSOP 81-1,Accounting for Performance of Construction-Type and Certain Production-Type Contracts.The costs associated with development agreements are included in cost of revenue. Revenue from software licenses and maintenance agreements is recognized in accordance with the provisions ofSOP 97-2, as amended bySOP 98-9,Modification ofSOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.Revenue from cancellation fees is recognized when cash is received from the customer.

Inventory

Inventory consists of work in process and finished goods and is stated at the lower of cost(first-in, first-out) or market. The Company establishes inventory reserves for estimated obsolete or unmarketable inventory equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future demand and market conditions. Shipping and handling costs are classified as a component of cost of revenue in the consolidated statements of income.

Rebates

The Company accounts for rebates in accordance with EITF IssueNo. 01-9,Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products), and, accordingly, records reductions to revenue for rebates in the same period that the related revenue is recorded. The amount of these reductions is based upon the terms included in the Company’s various rebate agreements.

Warranty

The Company’s products typically carry a one to three year warranty. The Company establishes reserves for estimated product warranty costs at the time revenue is recognized based upon its historical warranty experience, and additionally for any known product warranty issues.

Guarantees and Indemnifications

In some agreements to which the Company is a party, it has agreed to indemnify the other party for certain matters such as product liability. The Company also includes intellectual property indemnification provisions in its standard terms and conditions of sale for its products and has also included such provisions in certain agreements with third parties. To date, there have been no known events or circumstances that have resulted in any material costs related to these indemnification provisions, and as a result, no liabilities have been recorded in the accompanying condensed financial statements.

The Company also has obligations to indemnify certain of its present and former employees, officers and directors to the maximum extent permitted by law. The maximum potential amount of the future payments the Company could be required to make under these indemnification obligations could be significant; however, the Company maintains directors’ and officers’ insurance policies that should limit the Company’s exposure and enable the Company to recover a portion of amounts paid with respect to such obligations.

Stock-Based Compensation

The Company has in effect stock incentive plans under which incentive stock options have been granted to employees and restricted stock units and non-qualified stock options have been granted to employees and non-employee members of the Board of Directors. The Company also has an employee stock purchase plan for all eligible employees. Effective January 1, 2006 the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004),Share-Based Payment(“SFAS 123R”), which requires all share-based payments to employees, including grants of employee stock options, restricted stock units and employee stock purchase rights,

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to be recognized in the financial statements based upon their respective grant date fair values and does not allow the previously permitted pro forma disclosure-only method as an alternative to financial statement recognition. SFAS 123R supersedes Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees(“APB 25”), and related interpretations and amends SFAS No. 95,Statement of Cash Flows.SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under previous literature. In March 2005 the SEC issued SAB No. 107,Share-Based Payment(“SAB 107”), which provides guidance regarding the interaction of SFAS 123R and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of SFAS 123R.

SFAS 123R requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service periods. The Company has estimated the fair value of stock options and stock purchase rights as of the date of grant or assumption using the Black-Scholes option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the Company’s stock price. Although the Black-Scholes model meets the requirements of SFAS 123R and SAB 107, the fair values generated by the model may not be indicative of the actual fair values of the Company’s equity awards, as it does not consider other factors important to those awards to employees, such as continued employment, periodic vesting requirements, and limited transferability.

On November 10, 2005 the FASB issued Staff PositionNo. SFAS 123R-3,Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards(“SFAS 123R-3”). The Company has elected to adopt the alternative transition method provided inSFAS 123R-3 for calculating the tax effects of stock-based compensation pursuant to SFAS 123R. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (“APIC Pool”) related to the tax effects of employee stock-based compensation expense, and to determine the subsequent impact on the APIC Pool and unaudited condensed consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that were outstanding at the Company’s adoption of SFAS 123R. In addition, in accordance with SFAS 123R, SFAS No. 109,Accounting for Income Taxes(“SFAS 109”), and EITF Topic D-32,Intraperiod Tax Allocation of the Tax Effect of Pretax Income from Continuing Operations, the Company has elected to recognize excess income tax benefits from stock option exercises in additional paid-in capital only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to the Company.

Income Taxes

In July 2006 the FASB issued Interpretation (“FIN”) No. 48,Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with SFAS 109. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. The Company adopted FIN 48 effective January 1, 2007, and the provisions of FIN 48 will be applied to all income tax positions commencing from that date. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense. The cumulative effect of applying the provisions of FIN 48 has been reported as an adjustment to the opening balance of retained earnings as of January 1, 2007.

Net Income Per Share

Net income per share (basic) is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Net income per share (diluted) is calculated by adjusting

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

outstanding shares, assuming any dilutive effects of options and restricted stock units calculated using the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s Class A common stock results in a greater dilutive effect from outstanding options and restricted stock units. Additionally, the exercise of employee stock options and the vesting of restricted stock units results in a greater dilutive effect on net income per share.

Business Enterprise Segments

The Company operates in one reportable operating segment, wired and wireless broadband communications. SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information(“SFAS 131”), establishes standards for the way public business enterprises report information about operating segments in annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. Although the Company had four operating segments at June 30, 2007, under the aggregation criteria set forth in SFAS 131 the Company operates in only one reportable operating segment, wired and wireless broadband communications.

Under SFAS 131, two or more operating segments may be aggregated into a single operating segment for financial reporting purposes if aggregation is consistent with the objective and basic principles of SFAS 131, if the segments have similar economic characteristics, and if the segments are similar in each of the following areas:


	•	the nature of products and services;

	•	the nature of the production processes;

	•	the type or class of customer for their products and services; and

	•	the methods used to distribute their products or provide their services.

The Company meets each of the aggregation criteria for the following reasons:


	•	the sale of integrated circuits is the only material source of revenue for each of its four operating segments;

	•	the integrated circuits sold by each of its operating segments use the same standard CMOS manufacturing processes;

	•	the integrated circuits marketed by each of its operating segments are sold to one type of customer: manufacturers of wired and wireless communications equipment, which incorporate the Company’s integrated circuits into their electronic products; and

	•	all of its integrated circuits are sold through a centralized sales force and common wholesale distributors.

All of the Company’s operating segments share similar economic characteristics as they have a similar long term business model, operate at similar gross margins, and have similar research and development expenses and similar selling, general and administrative expenses. The causes for variation among each of the operating segments are the same and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product differentiation and (iv) size of market opportunity. Additionally, each operating segment is subject to the overall cyclical nature of the semiconductor industry. The number and composition of employees and the amounts and types of tools and materials required are similar for each operating segment. Finally, even though the Company periodically reorganizes its operating segments based upon changes in customers, end markets or products, acquisitions, long-term growth strategies, and the experience and bandwidth of the senior executives in charge, the common financial goals for each operating segment remain constant.

Because the Company meets each of the criteria set forth in SFAS 131 and its four operating segments as of June 30, 2007 share similar economic characteristics, the Company aggregates its results of operations into one reportable operating segment.

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


2.	Supplemental Financial Information

Inventory

The following table presents details of the Company’s inventory:


	June 30,		December 31,
	2007		2006
	(In thousands)

Work in process	$	62,250	$	71,506
Finished goods		129,074		131,288

	$	191,324	$	202,794

Purchased Intangible Assets

The following table presents details of the Company’s purchased intangible assets:


	June 30,							December 31,
	2007							2006
			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net
	(In thousands)

Completed technology	$	203,299	$	(166,348	)	$	36,951	$	186,799	$	(160,732	)	$	26,067
Customer relationships		49,266		(47,066	)		2,200		49,266		(46,766	)		2,500
Customer backlog		3,316		(3,316	)		—		3,316		(3,316	)		—
Other		7,614		(7,381	)		233		7,614		(7,152	)		462

	$	263,495	$	(224,111	)	$	39,384	$	246,995	$	(217,966	)	$	29,029

The following table presents details of the amortization of purchased intangible assets by expense category:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(In thousands)

Cost of revenue	$	2,566	$	2,744	$	5,616	$	5,725
Operating expense		200		605		529		1,688

	$	2,766	$	3,349	$	6,145	$	7,413

The following table presents details of the Company’s future amortization of purchased intangible assets. Should the Company acquire additional purchased intangible assets in the future, its cost of revenue or operating expenses will increase by the amortization of those assets.


	Purchased Intangible Assets Amortization by Year
	Remainder
	of 2007		2008		2009		2010		2011		Thereafter		Total
	(In thousands)

Cost of revenue	$	5,133	$	10,265	$	10,265	$	10,265	$	1,023	$	—	$	36,951
Operating expense		378		733		622		600		100		—		2,433

	$	5,511	$	10,998	$	10,887	$	10,865	$	1,123	$	—	$	39,384

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accrued Liabilities

The following table presents details of the Company’s accrued liabilities:


	June 30,		December 31,
	2007		2006
	(In thousands)

Accrued rebates	$	137,362	$	131,028
Warranty reserve		21,969		19,222
Accrued taxes		12,493		45,885
Accrued payments on repurchases of Class A common stock		13,188		—
Other		73,752		67,781

	$	258,764	$	263,916

Long-Term Liabilities

The following table presents details of the Company’s long-term liabilities:


	June 30,		December 31,
	2007		2006
	(In thousands)

Accrued taxes	$	28,192	$	—
Restructuring liabilities		3,477		4,399
Accrued settlement liabilities		—		2,000

	$	31,669	$	6,399

Accrued Rebate Activity

The following table summarizes the activity related to accrued rebates during the six months ended June 30, 2007 and 2006:


	Six Months Ended
	June 30,
	2007			2006
	(In thousands)

Beginning balance	$	131,028		$	99,645
Charged as a reduction to revenue		115,762			111,123
Payments and reversals		(109,428	)		(99,830	)

Ending balance	$	137,362		$	110,938

Warranty Reserve Activity

The following table summarizes the activity related to warranty reserves during the six months ended June 30, 2007 and 2006:


	Six Months Ended
	June 30,
	2007			2006
	(In thousands)

Beginning balance	$	19,222		$	14,131
Charged to costs and expenses		4,675			4,592
Acquired through acquisition		—			878
Payments		(1,928	)		(1,329	)

Ending balance	$	21,969		$	18,272

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restructuring Activity

The following table summarizes the activity related to the Company’s current and long-term restructuring liabilities during the six months ended June 30, 2007:


	Six Months Ended
	June 30, 2007
	(In thousands)

Beginning balance	$	10,723
Cash payments(1)		(2,294	)

Ending balance	$	8,429


(1)		These cash payments relate to net lease payments on excess facilities and non-cancelable lease costs. The consolidation of excess facilities costs will be paid over the respective lease terms through 2010.

Computation of Net Income Per Share

The following table presents the computation of net income per share:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(In thousands, except per share data)

Numerator: Net income	$	34,256		$	106,086		$	95,247		$	223,784

Denominator: Weighted average shares outstanding		540,895			547,969			544,414			543,588
Less: Unvested common shares outstanding		(44	)		(179	)		(58	)		(209	)

Denominator for net income per share (basic)		540,851			547,790			544,356			543,379
Effect of dilutive securities:
Unvested common shares outstanding		5			73			11			154
Stock awards		34,259			46,683			36,060			54,342

Denominator for net income per share (diluted)		575,115			594,546			580,427			597,875

Net income per share (basic)	$	.06		$	.19		$	.17		$	.41

Net income per share (diluted)	$	.06		$	.18		$	.16		$	.37

At June 30, 2007 common share equivalents were calculated based on (i) stock options to purchase 135.2 million shares of Class A or Class B common stock outstanding with a weighted average exercise price of $24.28 per share and (ii) 19.0 million restricted stock units that entitle the holder to receive a like number of freely transferable shares of Class A common stock as the awards vest.

Supplemental Cash Flow Information

The Company repurchased $13.2 million of its Class A common stock in one or more transactions that had not settled by June 30, 2007. In addition, billings of $6.6 million for capital equipment were accrued but not yet paid as of June 30, 2007. These amounts have been excluded from the unaudited condensed consolidated statements of cash flows.


3.	Business Combinations

In January 2007 the Company completed the acquisition of LVL7 Systems, Inc, a privately-held developer of production-ready networking software that enables networking original equipment manufacturers and original

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

design manufacturers to reduce development expenses and compress development timelines, for $62.5 million. In May 2007 the Company completed the acquisition of Octalica, Inc., a privately-held fabless semiconductor company that specializes in the design and development of networking technologies based on the MoCA^tm (Multimedia over Coax Alliance) standard, which enables distribution of high quality digital multimedia content throughout the home over existing coaxial cable, for $30.8 million.

The Company recorded charges of $0.3 million in the three months ended March 31, 2007 for LVL7 and $10.2 million in the three months ended June 30, 2007 for Octalica for purchased in-process research and development (“IPR&D”) expense. The amount allocated to IPR&D was determined through established valuation techniques used in the high technology industry and was expensed upon acquisition as it was determined that the underlying projects had not reached technological feasibility and no alternative future uses existed.

The Company acquired $1.3 million in net assets and recorded $44.4 million in goodwill and $16.5 million of completed technology in connection with the acquisition of LVL7. The Company also assumed $1.2 million in net liabilities and recorded $21.8 million in goodwill in connection with the acquisition of Octalica.

The Company’s primary reasons for the LVL7 and Octalica acquisitions were to reduce the time required to develop new technologies and products and bring them to market, incorporate enhanced functionality into and complement the Company’s existing product offerings, augment its engineering workforce, and enhance its technological capabilities. Certain of the cash consideration paid in each of the above acquisitions is currently held in escrow pursuant to the terms of the applicable acquisition agreement.

The unaudited condensed consolidated financial statements for the six months ended June 30, 2007 include the results of operations of LVL7 and Octalica commencing as of their respective acquisition dates. No supplemental pro forma information is presented for these acquisitions due to the immaterial effect of the acquisitions on the Company’s results of operations.

In addition, during the three months ended March 31, 2007 the Company received $14.0 million in connection with an escrow settlement from its acquisition of Siliquent Technologies, Inc., which resulted in a reduction of goodwill.


4.	Income Taxes

The Company recorded a tax benefit of $2.2 million and a tax provision of $1.3 million for the three and six months ended June 30, 2007, respectively, and tax provisions of $4.7 million and $8.1 million for the three and six months ended June 30, 2006, respectively. The effective tax rates for the Company were (6.9)% and 1.4% for the three and six months ended June 30, 2007, respectively, and 4.2% and 3.5% for the three and six months ended June 30, 2006, respectively. The difference between the Company’s effective tax rates and the 35% federal statutory rate resulted primarily from domestic losses recorded without income tax benefit and foreign earnings taxed at rates lower than the federal statutory rate for the three and six months ended June 30, 2007 and June 30, 2006. In addition, the Company recorded $4.6 million of tax benefits for the three and six months ended June 30, 2007, resulting primarily from the expiration of the statutes of limitations for the assessment of taxes in various foreign jurisdictions.

The Company utilizes the liability method of accounting for income taxes as set forth in SFAS 109. The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. SFAS 109 further states that forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. As a result of the Company’s recent cumulative losses in the U.S. and certain foreign jurisdictions, and the full utilization of its loss carryback opportunities, the Company has concluded that a full valuation allowance should be recorded in such jurisdictions. In certain other foreign jurisdictions where the Company does not have cumulative losses, the Company had net

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

deferred tax assets of $2.9 million and $1.8 million, at June 30, 2007 and December 31, 2006, respectively, in accordance with SFAS 109.

As a result of applying the provisions of FIN 48, the Company recognized a decrease of $3.9 million in the liability for unrecognized tax benefits, and a $4.7 million increase in retained earnings, as of January 1, 2007. The Company’s unrecognized tax benefits totaled $36.5 million at January 1, 2007 and relate to various foreign jurisdictions. This amount included $14.5 million of potential penalties and $1.1 million of interest. Included in the balance at January 1, 2007 are $34.3 million of tax benefits that, if recognized, would reduce the Company’s annual effective income tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company files U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2003 through 2007 tax years generally remain subject to examination by federal and most state tax authorities. In significant foreign jurisdictions, the 2001 through 2007 tax years generally remain subject to examination by tax authorities.


5.	Shareholders’ Equity

Share Repurchase Program

In February 2007 the Company’s Board of Directors authorized a new program to repurchase shares of the Company’s Class A common stock for cash. The Board approved the repurchase of shares having an aggregate market value of up to $1.0 billion, depending on market conditions and other factors. Repurchases under the program may be made at any time and from time to time during the 18 month period that commenced February 12, 2007. From the time the new program was implemented through June 30, 2007, the Company repurchased a total of 19.8 million shares at a weighted average price of $33.03 per share, of which $641.3 million was settled in cash during the six months ended June 30, 2007 and the remaining $13.2 million was included in accrued liabilities. At June 30, 2007, $345.5 million remained available to repurchase shares under the authorized program.

Comprehensive Income

The components of comprehensive income, net of taxes, are as follows:


	Six Months Ended
	June 30,
	2007		2006
	(In thousands)

Net income	$	95,247	$	223,784
Other comprehensive income (loss):
Translation adjustments		545		(399	)

Total comprehensive income	$	95,792	$	223,385

Accumulated other comprehensive income (loss) reflected on the unaudited condensed consolidated balance sheets at June 30, 2007 and December 31, 2006 represents accumulated translation adjustments.


6.	Employee Benefit Plans

Equity Awards

The Company granted employee stock options to purchase 14.6 million shares of its Class A common stock and awarded 7.4 million restricted stock units in the three months ending June 30, 2007 as part of the Company’s regular annual equity compensation review program. In total, the Company granted employee stock options to

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

purchase 18.4 million shares of its Class A common stock and awarded 10.0 million restricted stock units in the six months ended June 30, 2007.

Stock-Based Compensation Expense

Charges Related to the Voluntary Review of the Company’s Equity Award Practices

In connection with the Company’s equity award review completed in January 2007, the Company determined that the accounting measurement dates for most of its options granted between June 1998 and May 2003, covering options to purchase 232.9 million shares of its Class A or Class B common stock differed from the measurement dates previously used for such awards. As a result, there are potential adverse tax consequences that may apply to holders of affected options. By amending or replacing these options, the potential adverse tax consequences could be eliminated.

In March 2007 the Company offered to amend or replace affected options by adjusting the exercise price for each such option to the lower of (i) the fair market value per share of its Class A common stock on the revised measurement date applied to that option as a result of its equity award review and (ii) the closing selling price per share of its Class A common stock on the date on which the option is amended. If the adjusted exercise price for an affected option waslower thanthe original exercise price, that option was not amended but instead was replaced with a new option that had the same exercise price, vesting schedule and expiration date as the affected option, but a new grant date. The offer expired April 20, 2007. Participants whose affected options were amended pursuant to the offer are entitled to a special cash payment with respect to those options. The amount payable will be determined by multiplying (i) the amount of the increase in exercise price by (ii) the number of shares for which a participant’s options were amended. As a result, the Company will make payments of $29.6 million in January 2008 to reimburse affected employees for the increases in their exercise prices. A liability has been recorded for these payments and is included in wages and related benefits as of June 30, 2007.

In accordance with SFAS 123R, the Company recorded total estimated charges of $3.4 million in the six months ended June 30, 2007 and a reduction of additional paid-in capital in the amount of $26.2 million in connection with the offer. Charges of $0.1 million, $1.5 million and $1.8 million are included in cost of revenue, research and development expense and selling, general and administrative expense, respectively, as wages and related benefits for the six months ended June 30, 2007.


7.	Litigation

Intellectual Property Proceedings. In May 2005 the Company filed a complaint in the U.S. International Trade Commission (“ITC”) asserting that Qualcomm Incorporated (“Qualcomm”) engaged in unfair trade practices by importing integrated circuits and other products that infringe, both directly and indirectly, five of the Company’s patents relating generally to wired and wireless communications. The complaint seeks an exclusion order to bar importation of those Qualcomm products into the United States and a cease and desist order to bar further sales of infringing Qualcomm products that have already been imported. In June 2005 the ITC instituted

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

an investigation of Qualcomm based upon the allegations made in the Company’s complaint. The investigation was later limited to asserted infringement of three Broadcom patents. At Qualcomm’s request, the U.S. Patent and Trademark Office (“USPTO”) is reexamining one of the patents. In December 2006 the full Commission upheld the ITC administrative law judge’s October 2006 Initial Determination finding all three patents valid and one infringed. In June 2007 the Commission issued an exclusion order banning the importation into the United States of infringing Qualcomm chips and certain cellular phone models incorporating those chips. The Commission also issued a cease and desist order prohibiting Qualcomm from engaging in certain activities related to the infringing chips. The orders are subject to a60-day Presidential review period.

In May 2005 the Company filed two complaints against Qualcomm in the United States District Court for the Central District of California. The first complaint asserts that Qualcomm has infringed, both directly and indirectly, the same five patents asserted by Broadcom in the ITC complaint. The District Court complaint seeks preliminary and permanent injunctions against Qualcomm and the recovery of monetary damages, including treble damages for willful infringement, and attorneys’ fees. In July 2005 Qualcomm answered the complaint and asserted counterclaims seeking a declaratory judgment that the Company’s patents are invalid and not infringed. In December 2005 the court transferred the causes of action relating to two of the patents to the United States District Court for the Southern District of California. Pursuant to statute, the court has stayed the remainder of this action pending the outcome of the ITC action.

A second District Court complaint asserts that Qualcomm has infringed, both directly and indirectly, five other Broadcom patents relating generally to wired and wireless communications and multimedia processing technologies. The complaint seeks preliminary and permanent injunctions against Qualcomm and the recovery of monetary damages, including treble damages for willful infringement, and attorneys’ fees. In July 2005 Qualcomm answered the second complaint and asserted counterclaims seeking a declaratory judgment that the Company’s patents are invalid and not infringed. In November 2006 Broadcom withdrew one of the patents from the case. In December 2006 the court granted a motion to stay proceedings on a second patent pending the outcome of a USPTO reexamination of that patent initiated at Qualcomm’s request. In May 2007 a jury returned a verdict that Qualcomm willfully infringed the three remaining patents and awarded the Company $19.6 million in past damages. These amounts have not been recognized in the Company’s unaudited condensed consolidated income statement. The Company is petitioning the court to have (i) the damages award trebled, (ii) Qualcomm pay the Company’s attorneys’ fees, and (iii) Qualcomm enjoined from future infringement.

In July 2005 Qualcomm filed a complaint against the Company in the United States District Court for the Southern District of California alleging that certain Broadcom products infringed, both directly and indirectly, seven Qualcomm patents relating generally to the transmission, reception and processing of communication signals, including radio signalsand/or signals for wireless telephony. The Company filed an answer in September 2005 denying the allegations in Qualcomm’s complaint and asserting counterclaims. The counterclaims sought a declaratory judgment that the seven Qualcomm patents were invalid and not infringed, and asserted that Qualcomm had infringed, both directly and indirectly, six Broadcom patents relating generally to wired and wireless communications. In March 2007 the court granted the parties’ joint motion to dismiss this case.

In August 2005 Qualcomm filed a second complaint against the Company in the United States District Court for the Southern District of California alleging that Broadcom breached a contract relating to Bluetooth development and seeking a declaration that two of the Company’s patents relating to Bluetooth technology were invalid and not infringed. The Company filed an answer in April 2006 denying the allegations in the complaint and asserting counterclaims. The counterclaims asserted that Qualcomm had infringed, both directly and indirectly, the same two Broadcom patents, and also alleged breach of the Bluetooth contract by Qualcomm. In February 2007 the court granted the parties’ joint motion to dismiss this case.

In October 2005 Qualcomm filed a third complaint against the Company in the United States District Court for the Southern District of California alleging that certain Broadcom products infringe, both directly and indirectly, two Qualcomm patents relating generally to the processing of digital video signals. The complaint seeks preliminary

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and permanent injunctions against the Company as well as the recovery of monetary damages and attorneys’ fees. The Company filed an answer in December 2005 denying the allegations in Qualcomm’s complaint and asserting counterclaims seeking a declaratory judgment that the two Qualcomm patents are invalid and not infringed. In January 2007 a jury returned a verdict that the Company did not infringe either patent, and rendered advisory verdicts that Qualcomm committed inequitable conduct before the U.S. Patent and Trademark Office and waived its patent rights in connection with its conduct before an industry standards body. In March 2007 the court adopted the jury’s finding that Qualcomm waived its patent rights. The court is currently considering the appropriate remedy for Qualcomm’s conduct, including whether Qualcomm should pay the Company’s attorneys’ fees.

In March 2006 Qualcomm filed a fourth complaint against the Company in the United States District Court for the Southern District of California alleging that the Company had misappropriated certain Qualcomm trade secrets and that certain Broadcom products infringed, both directly and indirectly, a patent related generally to orthogonal frequency division multiplexing technology. The Company filed an answer in May 2006 denying the allegations in Qualcomm’s complaint and asserting counterclaims. The counterclaims sought a declaratory judgment that the Qualcomm patent was invalid and not infringed, and asserted that Qualcomm had infringed, both directly and indirectly, two Broadcom patents relating generally to video technology. The Company amended its answer to add a counterclaim asserting that Qualcomm had misappropriated certain Broadcom trade secrets, and Qualcomm amended its complaint to add three individual Broadcom employees as defendants and include additional allegations of trade secret misappropriation. In March 2007 the court granted the parties’ joint motion to dismiss this case.

In December 2006 SiRF Technology, Inc. (“SiRF”) filed a complaint in the United States District Court for the Central District of California against Global Locate, Inc., a wholly-owned subsidiary of the Company acquired in July 2007 (see Note 8), alleging that certain Global Locate products infringe four SiRF patents relating generally to global positioning system (“GPS”) technology. In January 2007 Global Locate filed an answer denying the allegations in SiRF’s complaint and asserting counterclaims. The counterclaims seek a declaratory judgment that the four SiRF patents are invalid and not infringed, assert that SiRF has infringed four Global Locate patents relating generally to GPS technology, and assert unfair competition and antitrust violations related to the filing of sham litigation. In May 2007 the court granted Global Locate’s motion to stay the case until the ITC actions between Global Locate and SiRF, discussed below, become final.

In February 2007 SiRF filed a complaint in the ITC asserting that Global Locate engaged in unfair trade practices by importing integrated circuits and other products that infringe, both directly and indirectly, four of SiRF’s patents relating generally to GPS technology. The complaint seeks an exclusion order to bar importation of those Global Locate products into the United States and a cease and desist order to bar further sales of infringing Global Locate products that have already been imported. In March 2007 the ITC instituted an investigation of Global Locate based upon the allegations made in the SiRF complaint. The ITC has set a target date for completion of the investigation in May 2008.

In April 2007 Global Locate filed a complaint in the ITC against SiRF and four of its customers,e-TEN Corporation, Pharos Science & Applications, Inc., MiTAC International Corporation and Mio Technology Limited (collectively, the “SiRF Defendants”), asserting that the SiRF Defendants engaged in unfair trade practices by importing GPS devices, including integrated circuits and embedded software, and products containing such products, such as personal navigation devices and GPS-enabled cellular telephones, that infringe, both directly and indirectly, six of Global Locate’s patents relating generally to GPS technology. The complaint seeks an exclusion order to bar importation of the SiRF Defendants’ products into the United States and a cease and desist order to bar further sales of infringing products that have already been imported. In May 2007 the ITC instituted an investigation of the SiRF Defendants based upon the allegations made in the Global Locate’s complaint. The ITC has set a target date for completion of the investigation in August 2008.

Antitrust and Unfair Competition Proceedings. In July 2005 the Company filed a complaint against Qualcomm in the United States District Court for the District of New Jersey asserting that Qualcomm’s licensing and other practices related to cellular technology and products violate federal and state antitrust laws. The complaint also asserts

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

causes of action based on breach of contract, promissory estoppel, fraud, and tortious interference with prospective economic advantage. In September 2005 the Company filed an amended complaint in the action also challenging Qualcomm’s proposed acquisition of Flarion Technologies, Inc. under the antitrust laws and asserting violations of various state unfair competition and unfair business practices laws. In August 2006 the court granted Qualcomm’s motion to dismiss the complaint. In September 2006 Broadcom filed a notice of appeal to the United States Court of Appeals for the Third Circuit. Oral argument on the appeal was held in June 2007.

In October 2005 the Company and five other leading mobile wireless technology companies filed complaints with the European Commission requesting that the Commission investigate Qualcomm’s anticompetitive conduct related to the licensing of its patents and the sale of its chipsets for mobile wireless devices and systems. The Commission has commenced a preliminary investigation, and is determining whether to institute a formal investigation, of Qualcomm.

In June 2006 the Company and another leading mobile wireless technology company filed complaints with the Korean Fair Trade Commission requesting that the Commission investigate Qualcomm’s anticompetitive conduct related to the licensing of its patents and the sale of its chipsets for mobile wireless devices and systems. The Commission has instituted a formal investigation of Qualcomm.

In April 2007 the Company filed a complaint in the Superior Court for Orange County, California alleging that Qualcomm’s conduct before various industry standards organizations constitutes unfair competition, fraud and breach of contract. The complaint seeks an injunction against Qualcomm as well as the recovery of monetary damages. Qualcomm has filed a motion to dismiss the complaint.

Securities Litigation. From March through August 2006 a number of purported Broadcom shareholders filed putative shareholder derivative actions (the “Options Derivative Actions”) against the Company, each of the members of its Board of Directors, certain current or former officers, and Henry T. Nicholas III, its co-founder, alleging, among other things, that the defendants improperly dated certain Broadcom employee stock option grants. Four of those cases,Murphy v. McGregor, et al.(CaseNo. CV06-3252 R (CWx)),Shei v. McGregor, et al.(CaseNo. SACV06-663 R (CWx)),Ronconi v. Dull, et al.(Case No. SACV06-771 R (CWx)) andJin v. Broadcom Corporation, et al.(Case No. 06CV00573) have been consolidated in the United States District Court for the Central District of California. The plaintiffs filed a consolidated amended complaint in November 2006. In addition, two putative shareholder derivative actions,Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Samueli, et al.(Case No. 06CC0124) andServais v. Samueli, et al.(Case No. 06CC0142), were filed in the California Superior Court for the County of Orange. The Superior Court consolidated the state court derivative actions in August 2006, and the plaintiffs filed a consolidated amended complaint in September 2006. The plaintiffs in the Options Derivative Actions contend, among other things, that the defendants’ conduct violated United States and California securities laws, breached defendants’ fiduciary duties, wasted corporate assets, unjustly enriched the defendants, and caused errors in the Company’s financial statements. The plaintiffs seek, among other things, unspecified damages and disgorgement of profits from the alleged conduct, to be paid to Broadcom.

In January 2007 the Superior Court granted defendants’ motion to stay the state derivative action pending resolution of the prior-filed federal derivative action. In March 2007 the court in the federal derivative action denied the Company’s motion to dismiss, which motion was based on the ground that the shareholder plaintiffs lack standing to assert claims on behalf of Broadcom. Motions to dismiss filed by the individual defendants were heard, and mostly denied, in May 2007. Additionally, in May 2007 the Board of Directors established a special litigation committee to decide what course of action the Company should pursue in respect of the claims asserted in the Options Derivative Actions. The Company intends to vigorously defend each of the Options Derivative Actions.

From August through October 2006 several plaintiffs filed purported shareholder class actions in the United States District Court for the Central District of California against the Company and certain of its current or former officers and directors, entitledBakshi v. Samueli, et al.(CaseNo. 06-5036 R (CWx)),Mills v. Samueli, et al.(Case No. SACV06-9674 DOC R(CWx)), andMinnesota Bakers Union Pension Fund, et al. v. Broadcom Corp., et al.(Case No. SACV06-970 CJC R (CWx)) (the “Options Class Actions”). The essence of the plaintiffs’

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

allegations is that Broadcom improperly backdated stock options, resulting in false or misleading disclosures concerning, among other things, Broadcom’s business and financial condition. Plaintiffs also allege that Broadcom failed to account for and pay taxes on stock options properly, that the individual defendants sold Broadcom stock while in possession of material nonpublic information, and that the defendants’ conduct caused artificial inflation in Broadcom’s stock price and damages to the putative plaintiff class. The plaintiffs assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 andRule 10b-5 promulgated thereunder. In November 2006, the Court consolidated the Options Class Actions and appointed the New Mexico State Investment Council as lead class plaintiff. There is currently a dispute regarding the appointment of lead class counsel, which the lead class plaintiff has appealed to the federal appeals court. The Company’s response to the consolidated class action complaint will not be due until the appeal and the dispute regarding the appointment of class counsel is resolved. The Company intends to defend the consolidated action vigorously.

The Company has entered into indemnification agreements with each of its present and former directors and officers. Under these agreements, Broadcom is required to indemnify each such director or officer against expenses, including attorney’s fees, judgments, fines and settlements, paid by such individual in connection with the Options Derivative Actions and Options Class Actions (other than indemnified liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest).

SEC Formal Order of Investigation and United States Attorney’s Office Investigation.In June 2006 the Company received an informal request for information from the staff of the Los Angeles regional office of the Securities and Exchange Commission regarding its historical option granting practices. In December 2006 the SEC issued a formal order of investigation and a subpoena for the production of documents. The SEC continues to depose present and former Company employees, officers and directors as part of its investigation. On July 19, 2007 the Company received a “Wells Notice” from the SEC in connection with this investigation. The Chairman of the Board of Directors and Chief Technical Officer of the Company, Dr. Henry Samueli, also received a Wells Notice. The Wells Notices provide notification that the staff of the SEC intends to recommend to the Commission that it bring a civil action against the recipients for possible violations of the securities laws. Based on discussions with the SEC staff, the Company believes that the issues the staff intends to pursue relate to the Company’s historical option granting processes and the accounting relating to those option grants. Under the process established by the SEC, recipients have the opportunity to respond in writing to a Wells Notice before the SEC staff makes any formal recommendation to the Commission regarding what action, if any, should be brought by the SEC. The Company and Dr. Samueli intend to provide written submissions to the SEC in response to the Wells Notices and may seek meetings with the SEC staff. The Company is continuing to cooperate with the SEC, but does not know when the investigation will be resolved or what, if any, actions the SEC may require it or Dr. Samueli to take as part of that resolution. In August 2006 the Company was informally contacted by the U.S. Attorney’s Office for the Central District of California and asked to produce documents. In 2006, the Company voluntarily provided documents and data to the U.S Attorney’s Office. In 2007 the Company has continued to provide substantial amounts of documents and information to the U.S. Attorney’s Office on a voluntary basis. In addition, the Company has produced documents pursuant to grand jury subpoenas. The U.S. Attorney’s Office continues to interview present and former Company employees, officers and directors as part of its investigation. The Company is continuing to cooperate with the U.S. Attorney’s Office in its investigation. Any action by the SEC, the U.S. Attorney’s Office or other governmental agency could result in civil or criminal sanctionsand/or fines against the Companyand/or certain of its current or former officers, directorsand/or employees.

United States Attorney’s Office Investigation and Prosecution. In June 2005 the United States Attorney’s Office for the Northern District of California commenced an investigation into the possible misuse of proprietary competitor information by certain Broadcom employees. In December 2005 one former employee was indicted for fraud and related activity in connection with computers and trade secret misappropriation. The former employee had been immediately suspended in June 2005, after just two months’ employment, when the Company learned about the government investigation. Following an internal investigation, his employment was terminated, nearly

BROADCOM CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

two months prior to the indictment. The indictment does not allege any wrongdoing by Broadcom, which is cooperating fully with the ongoing investigation and the prosecution.

General. The foregoing discussion includes material developments that occurred during the three and six months ended June 30, 2007 or thereafter in material legal proceedings in which the Companyand/or its subsidiaries are involved. For additional information regarding certain of these legal proceedings, see Note 11 of Notes to Consolidated Financial Statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 2006.

The Company and its subsidiaries are also involved in other legal proceedings, claims and litigation arising in the ordinary course of business.

The pending proceedings involve complex questions of fact and law and will require the expenditure of significant funds and the diversion of other resources to prosecute and defend. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible. The resolution of any future intellectual property litigation may require the Company to pay damages for past infringement or one-time license fees or running royalties, which could adversely impact gross profit and gross margins in future periods, or could prevent Broadcom from manufacturing or selling some of its products or limit or restrict the type of work that employees involved in such litigation may perform for Broadcom. From time to time the Company may enter into confidential discussions regarding the potential settlement of pending litigation or other proceedings; however, there can be no assurance that any such discussions will occur or will result in a settlement. The settlement of any pending litigation or other proceeding could require Broadcom to incur substantial settlement payments and costs. In addition, the settlement of any intellectual property proceeding may require the Company to obtain a license under the other party’s intellectual property rights that could require one-time license feesand/or royalty payments in the futureand/or to grant a license to certain of the Company’s intellectual property rights to the other party under a cross-license agreement. If any of those events were to occur, Broadcom’s business, financial condition and results of operations could be materially and adversely affected.


8.	Subsequent Events

Acquisition

In July 2007 the Company completed the acquisition of Global Locate, Inc., a privately-held, fabless provider of industry-leading global positioning system (GPS) and assisted GPS (A-GPS) semiconductor products and software. In connection with the acquisition, the Company paid approximately $142.7 million in cash in exchange for all outstanding shares of capital stock and other rights of Global Locate. A portion of the cash consideration payable to the stockholders of Global Locate was placed into escrow pursuant to the terms of the acquisition agreement. Additional consideration of up to $80.0 million in cash will be reserved for future payment to the former holders of Global Locate capital stock and other rights upon satisfaction of certain future performance goals. In connection with the transaction, certain former stockholders of Global Locate purchased 93,750 restricted shares of Broadcom’s Class A common stock for $3.0 million. The Company may record a charge for purchased IPR&D expenses related to the acquisition in the three months ending September 30, 2007. The amount of that charge, if any, has not yet been determined.

Patent License Agreement

In July 2007 the Company entered into a patent license agreement with a wireless network operator. Under the agreement, royalty payments will be made to the Company at a rate of $6.00 per unit for each applicable unit sold by the operator after the date of the agreement, subject to certain conditions, including without limitation a maximum payment of $40 million per calendar quarter and a lifetime maximum of $200 million.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

Cautionary Statement

You should read the following discussion and analysis in conjunction with our Unaudited Condensed Consolidated Financial Statements and the related Notes thereto contained in Part I, Item 1 of this Report. The information contained in this Quarterly Report onForm 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Report and in our other reports filed with SEC, including our Annual Report onForm 10-K for the year ended December 31, 2006 and subsequent reports onForms 10-Q and8-K, which discuss our business in greater detail.

The section entitled “Risk Factors” set forth below, and similar discussions in our other SEC filings, describe some of the important risk factors that may affect our business, financial condition, results of operationsand/or liquidity. You should carefully consider those risks, in addition to the other information in this Report and in our other filings with the SEC, before deciding to purchase, hold or sell our common stock.

All statements included or incorporated by reference in this Report, other than statements or characterizations of historical fact, are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements concerning projected net revenue, costs and expenses and gross margin; our accounting estimates, assumptions and judgments; the impact of the January 2007 restatement of our financial statements for prior periods; estimates related to the amountand/or timing of the expensing of unearned stock-based compensation expense; our success in pending litigation; the demand for our products; the effect that seasonality and volume fluctuations in the demand for our customers’ consumer-oriented products will have on our quarterly operating results; our dependence on a few key customers for a substantial portion of our revenue; our ability to scale operations in response to changes in demand for existing products and services or the demand for new products requested by our customers; the competitive nature of and anticipated growth in our markets; our ability to migrate to smaller process geometries; manufacturing, assembly and test capacity; our ability to consummate acquisitions and integrate their operations successfully; our potential needs for additional capital; inventory and accounts receivable levels; and the level of accrued rebates. These forward-looking statements are based on our current expectations, estimates and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are listed under the section “Risk Factors” contained in Part II, Item 1A of this Report. These forward-looking statements speak only as of the date of this Report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

Overview

Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications. Our products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. Broadcom provides the industry’s broadest portfolio of state-of-the-artsystem-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. Our diverse product portfolio includes solutions for digital cable, satellite and Internet Protocol (IP) set-top boxes and media servers; high definition television (HDTV); high definition DVD players and personal video recording (PVR) devices; cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan, wide area and storage networking; SystemI/O server solutions; broadband network and security processors; wireless and personal area networking; cellular communications; mobile multimedia and applications processors; mobile power management; and Voice over Internet Protocol (VoIP) gateway and telephony systems.

Net Revenue. We sell our products to leading manufacturers of wired and wireless communications equipment in each of our target markets. Because we leverage our technologies across different markets, certain of

our integrated circuits may be incorporated into equipment used in multiple markets. We utilize independent foundries and third-party subcontractors to manufacture, assemble and test all of our semiconductor products.

Our net revenue is generated principally by sales of our semiconductor products. We derive the remainder of our net revenue predominantly from software licenses, development agreements, support and maintenance agreements and cancellation fees. The majority of our sales occur through the efforts of our direct sales force. The remaining balance of our sales occur through distributors.

The following table presents details of our net revenue:


							Six Months
	Three Months Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006

Sales of semiconductor products		99.0	%		98.5	%		99.0	%		99.0	%
Other		1.0			1.5			1.0			1.0

		100.0	%		100.0	%		100.0	%		100.0	%


							Six Months
	Three Months Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006

Sales made through direct sales force		85.1	%		83.0	%		85.3	%		82.6	%
Sales made through distributors		14.9			17.0			14.7			17.4

		100.0	%		100.0	%		100.0	%		100.0	%

The demand for our products has been affected in the past, and may continue to be affected in the future, by various factors, including, but not limited to, the following:


	•	general economic and market conditions in the semiconductor industry and wired and wireless communications markets;

	•	the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;

	•	our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost effective and timely manner;

	•	seasonality in the demand for consumer products into which our products are incorporated;

	•	the rate at which our present and future customers and end-users adopt our products and technologies in our target markets; and

	•	the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products.

For these and other reasons, our net revenue and results of operations for the three months ended June 30, 2007 and prior periods may not necessarily be indicative of future net revenue and results of operations.

From time to time, our key customers place large orders causing our quarterly net revenue to fluctuate significantly. We expect that these fluctuations will continue and that they may be exaggerated by the increasing volume of Broadcom solutions that are incorporated into consumer products, sales of which are typically subject to greater seasonality and greater volume fluctuations than non-consumer OEM products. We also maintain inventory, or hubbing, arrangements with certain of our customers. While we have not shipped a significant amount of product under those arrangements as of June 30, 2007, we anticipate that such amount will increase in the near future. Pursuant to these arrangements we deliver products to a customer or a designated third party warehouse based upon the customer’s projected needs, but do not recognize product revenue unless and until the customer reports that it has removed our product from the warehouse to incorporate into its end products.

Historically we have had good visibility into customer requirements and shipments within a quarter. However, if a customer does not take our products under a hubbing arrangement in accordance with the schedule it originally provided us, our predicted future revenue stream could vary substantially from our forecasts and our results of operations could be materially and adversely affected. Additionally, since we own inventory that is physically located in a third party’s warehouse, our ability to effectively manage inventory levels may be impaired, causing our total inventory turns to decrease, which could increase expenses associated with excess and obsolete product and negatively impact our cash flow.

Sales to our five largest customers, including sales to their manufacturing subcontractors, as a percentage of net revenue were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Five largest customers as a group		41.2	%		45.4	%		43.5	%		45.9	%

Net revenue derived from all independent customers located outside the United States, excluding foreign subsidiaries or manufacturing subcontractors of customers that are headquartered in the United States, as a percentage of total net revenue was as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Asia (primarily in Japan, China, Korea, and Taiwan)		25.6	%		18.9	%		24.4	%		19.4	%
Europe (primarily in France and the United Kingdom)		7.8			10.2			7.5			9.8
Other		0.6			0.3			0.6			0.4

		34.0	%		29.4	%		32.5	%		29.6	%

Net revenue derived from shipments to international destinations, as a percentage of total net revenue was as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Asia (primarily in China, Hong Kong, Taiwan and Japan)		82.0	%		79.1	%		81.5	%		78.5	%
Europe (primarily in Hungary and Sweden)		3.0			4.2			2.9			3.6
Other		3.2			4.0			3.6			5.3

		88.2	%		87.3	%		88.0	%		87.4	%

All of our revenue to date has been denominated in U.S. dollars.

Gross Margin. Our gross margin, or gross profit as a percentage of net revenue, has been affected in the past, and may continue to be affected in the future, by various factors, including, but not limited to, the following:


	•	our product mix and volume of product sales (including sales to high volume customers);

	•	the positions of our products in their respective life cycles;

	•	the effects of competition;

	•	the effects of competitive pricing programs;

	•	manufacturing cost efficiencies and inefficiencies;

	•	fluctuations in direct product costs such as wafer pricing and assembly, packaging and testing costs, and overhead costs;


	•	product warranty costs;

	•	provisions for excess or obsolete inventories;

	•	amortization of purchased intangible assets;

	•	licensing and royalty arrangements; and

	•	stock-based compensation expense.

Net Income (Loss). Our net income (loss) has been affected in the past, and may continue to be affected in the future, by various factors, including, but not limited to, the following:


	•	stock-based compensation expense;

	•	in-process research and development, or IPR&D;

	•	litigation costs;

	•	settlement costs;

	•	impairment of goodwill and other intangible assets;

	•	income tax benefits from adjustments to tax reserves of foreign subsidiaries;

	•	the loss of interest income resulting from the amount we expend on repurchases of our Class A common stock;

	•	gain (loss) on strategic investments; and

	•	restructuring costs or reversals thereof.

In the three months ended June 30, 2007 our net income was $34.3 million as compared to $106.1 million in the three months ended June 30, 2006, a difference of $71.8 million. This decrease in profitability was the direct result of (i) a 4.6% decrease in net revenue (ii) a $59.8 million increase in operating expenses due principally to an increase in the number of employees engaged in research and development activities, resulting from both direct hiring and acquisitions, and an increase in cash compensation levels since June 30, 2006, as well as a charge for IPR&D in the amount of $10.2 million.

In the six months ended June 30, 2007 our net income was $95.2 million as compared to $223.8 million in the six months ended June 30, 2006, a difference of $128.6 million. This decrease in profitability was the direct result of (i) a 2.3% decrease in net revenue (ii) a $120.5 million increase in operating expenses due principally to an increase in the number of employees engaged in research and development activities, resulting from both direct hiring and acquisitions, and an increase in cash compensation levels since June 30, 2006, as well as charges for IPR&D in the amount of $10.5 million.

Product Cycles. The cycle for test, evaluation and adoption of our products by customers can range from three to more than nine months, with an additional three to more than twelve months before a customer commences volume production of equipment incorporating our products. Due to this lengthy sales cycle, we may experience significant delays from the time we incur expenses for research and development, selling, general and administrative efforts, and investments in inventory, to the time we generate corresponding revenue, if any. The rate of new orders may vary significantly from month to month and quarter to quarter. If anticipated sales or shipments in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our results of operations for that quarter, and potentially for future quarters, would be materially and adversely affected.

Acquisition Strategy. An element of our business strategy involves the acquisition of businesses, assets, products or technologies that allow us to reduce the time required to develop new technologies and products and bring them to market, incorporate enhanced functionality into and complement our existing product offerings, augment our engineering workforce,and/or enhance our technological capabilities. We plan to continue to evaluate strategic opportunities as they arise, including acquisitions and other business combination transactions, strategic relationships, capital infusions and the purchase or sale of assets. See Note 3 of Notes to Unaudited Condensed

Consolidated Financial Statements for information related to the acquisitions made during the six months ended June 30, 2007.

Business Enterprise Segments. We operate in one reportable operating segment, wired and wireless broadband communications. SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information, or SFAS 131, establishes standards for the way public business enterprises report information about operating segments in annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. Although we had four operating segments at June 30, 2007, under the aggregation criteria set forth in SFAS 131 we operate in only one reportable operating segment, wired and wireless broadband communications.


	•	the nature of products and services;

	•	the nature of the production processes;

	•	the type or class of customer for their products and services; and

	•	the methods used to distribute their products or provide their services.

We meet each of the aggregation criteria for the following reasons:


	•	the sale of integrated circuits is the only material source of revenue for each of our four operating segments;

	•	the integrated circuits sold by each of our operating segments use the same standard CMOS manufacturing processes;

	•	the integrated circuits marketed by each of our operating segments are sold to one type of customer: manufacturers of wired and wireless communications equipment, which incorporate our integrated circuits into their electronic products; and

	•	all of our integrated circuits are sold through a centralized sales force and common wholesale distributors.

All of our operating segments share similar economic characteristics as they have a similar long term business model, operate at similar gross margins, and have similar research and development expenses and similar selling, general and administrative expenses. The causes for variation among each of our operating segments are the same and include factors such as (i) life cycle and price and cost fluctuations, (ii) number of competitors, (iii) product differentiation and (iv) size of market opportunity. Additionally, each operating segment is subject to the overall cyclical nature of the semiconductor industry. The number and composition of employees and the amounts and types of tools and materials required are similar for each operating segment. Finally, even though we periodically reorganize our operating segments based upon changes in customers, end markets or products, acquisitions, long- term growth strategies, and the experience and bandwidth of the senior executives in charge, the common financial goals for each operating segment remain constant.

Because we meet each of the criteria set forth in SFAS 131 and our four operating segments as of June 30, 2007 share similar economic characteristics, we aggregate our results of operations into one reportable operating segment.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to allowances for doubtful accounts, sales returns and allowances, warranty reserves, inventory reserves, stock-based compensation expense, goodwill and purchased intangible asset valuations, strategic investments, deferred income tax asset valuation allowances, restructuring costs,

litigation and other loss contingencies. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements:


	•	Net Revenue. We recognize product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. These criteria are usually met at the time of product shipment. However, we do not recognize revenue until all customer acceptance requirements have been met, when applicable. Customer purchase ordersand/or contracts are generally used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery or that services have been rendered. We assess whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess the collectibility of our accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history.

A portion of our sales are made through distributors under agreements allowing for pricing creditsand/or rights of return. Product revenue on sales made through these distributors is not recognized until the distributors ship the product to their customers. We also maintain inventory, or hubbing, arrangements with certain of our customers. While we have not shipped a significant amount of product under those arrangements as of June 30, 2007, we anticipate that such amount will increase over time. Pursuant to these arrangements we deliver products to a customer or a designated third party warehouse based upon the customer’s projected needs, but do not recognize product revenue unless and until the customer reports that it has removed our product from the warehouse to incorporate into its end products. Historically we have had good visibility into customer requirements and shipments within a quarter. However, if a customer does not take our products under a hubbing arrangement in accordance with the schedule it originally provided us, our predicted future revenue stream could vary substantially from our forecasts and our results of operations could be materially and adversely affected.


	•	Sales Returns and Allowance for Doubtful Accounts. We record reductions to revenue for estimated product returns and pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recorded. The amount of these reductions is based on historical sales returns, analysis of credit memo data, specific criteria included in rebate agreements, and other factors known at the time. Additional reductions to revenue would result if actual product returns or pricing adjustments exceed our estimates. We also maintain an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. If the financial condition of any of our customers were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances could be required.

	•	Inventory and Warranty Reserves. We establish inventory reserves for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and its estimated realizable value based upon assumptions about future demand and market conditions. If actual demand and market conditions are less favorable than those projected by management, additional inventory reserves could be required. Under the hubbing arrangements that we maintain with certain customers, we own inventory that is physically located in a third party’s warehouse. As a result, our ability to effectively manage inventory levels may be impaired, which would cause our total inventory turns to decrease. In that event, our expenses associated with excess and obsolete inventory could increase and our cash flow could be negatively impacted. Our products typically carry a one to three year warranty. We establish reserves for estimated product warranty costs at the time revenue is recognized. Although we engage in extensive


		product quality programs and processes, our warranty obligation has been and may in the future be affected by product failure rates, product recalls, repair or field replacement costs and additional development costs incurred in correcting any product failure, as well as possible claims for consequential costs. Should actual product failure rates, use of materials or service delivery costs differ from our estimates, additional warranty reserves could be required. In that event, our gross profit and gross margins would be reduced.


	•	Stock-Based Compensation Expense. Effective January 1, 2006 we adopted SFAS 123R, which requires all share-based payments, including grants of stock options, restricted stock units and employee stock purchase rights, to be recognized in our financial statements based upon their respective grant date fair values. Under this standard, the fair value of each employee stock option and employee stock purchase right is estimated on the date of grant using an option pricing model that meets certain requirements. We currently use the Black-Scholes option pricing model to estimate the fair value of our stock options and stock purchase rights. The Black-Scholes model meets the requirements of SFAS 123R but the fair values generated by the model may not be indicative of the actual fair values of our equity awards as it does not consider certain factors important to those awards to employees, such as continued employment and periodic vesting requirements as well as limited transferability. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We use the implied volatility for traded options on our stock as the expected volatility assumption required in the Black-Scholes model. Our selection of the implied volatility approach is based on the availability of data regarding actively traded options on our stock as we believe that implied volatility is more representative than historical volatility. The expected life of the stock options is based on historical and other economic data trended into the future. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our stock options and stock purchase rights. The dividend yield assumption is based on our history and expectation of dividend payouts. The fair value of our restricted stock units is based on the closing market price of our Class A common stock on the date of grant. Stock-based compensation expense recognized in our financial statements in 2006 and thereafter is based on awards that are ultimately expected to vest. We will evaluate the assumptions used to value stock awards on a quarterly basis. If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. To the extent that we grant additional equity securities to employees or we assume unvested securities in connection with any acquisitions, our stock-based compensation expense will be increased by the additional unearned compensation resulting from those additional grants or acquisitions.

	•	Goodwill and Purchased Intangible Assets. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired. The amounts and useful lives assigned to intangible assets acquired, other than goodwill, impact the amount and timing of future amortization, and the amount assigned to in-process research and development is expensed immediately. The value of our intangible assets, including goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology company stocks, including the valuation of our common stock, (iii) another significant slowdown in the worldwide economy or the semiconductor industry, or (iv) any failure to meet the performance projections included in our forecasts of future operating results. We evaluate these assets, including purchased intangible assets deemed to have indefinite lives, on an annual basis in the fourth quarter or more frequently if we believe indicators of impairment exist. In the process of our annual impairment review, we primarily use the income approach methodology of valuation that includes the discounted cash flow method as well as other generally accepted valuation methodologies to determine the fair value of our intangible assets. Significant management judgment is required in the forecasts of future operating results that are used in the discounted cash flow method of valuation. The estimates we have used are consistent with the plans and estimates that we use to manage our business. It is possible, however, that the plans may change and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.


	•	Deferred Taxes and Uncertain Tax Positions. We utilize the liability method of accounting for income taxes. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. As a result of our cumulative losses in the U.S. and certain foreign jurisdictions and the full utilization of our loss carryback opportunities, we have concluded that a full valuation allowance against our net deferred tax assets is appropriate in such jurisdictions. In certain other foreign jurisdictions where we do not have cumulative losses, we record valuation allowances to reduce our net deferred tax assets to the amount we believe is more likely than not to be realized. In the future, if we realize a deferred tax asset that currently carries a valuation allowance, we may record a reduction to income tax expense in the period of such realization. In July 2006 the FASB issued Interpretation No. 48,Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109, or FIN 48, which requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under FIN 48, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various tax jurisdictions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, evolution of regulations and court rulings. Therefore, the actual liability for U.S. or foreign taxes may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially to reverse previously recorded tax liabilities.

	•	Litigation and Settlement Costs. From time to time, we are involved in disputes, litigation and other legal proceedings. We prosecute and defend these matters aggressively. However, there are many uncertainties associated with any litigation, and we cannot assure you that these actions or other third party claims against us will be resolved without costly litigationand/or substantial settlement charges. In addition, the resolution of any future intellectual property litigation may require us to pay damages for past infringement or one-time license fees or running royalties, which could adversely impact gross profit and gross margins in future periods, or could prevent us from manufacturing or selling some of our products or limit or restrict the type of work that employees involved in such litigation may perform for Broadcom. If any of those events were to occur, our business, financial condition and results of operations could be materially and adversely affected. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated. However, the actual liability in any such litigation may be materially different from our estimates, which could result in the need to record additional costs.

Results of Operations for the Three and Six Months Ended June 30, 2007 Compared to the Three and Six Months Ended June 30, 2006

The following table sets forth certain consolidated statements of income data expressed as a percentage of net revenue for the periods indicated:


	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2007			2006			2007			2006

Net revenue		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		48.7			48.6			48.8			48.4

Gross profit		51.3			51.4			51.2			51.6
Operating expense:
Research and development		37.0			29.7			35.2			28.9
Selling, general and administrative		13.4			13.0			13.8			12.7
Amortization of purchased intangible assets		0.0			0.1			0.0			0.1
In-process research and development		1.1			—			0.6			0.3
Impairment of other intangible assets		—			—			0.1			—

Income (loss) from operations		(0.2	)		8.6			1.5			9.6
Interest income, net		3.7			3.0			3.9			2.8
Other income (expense), net		0.1			0.2			(0.0	)		0.2

Income before income taxes		3.6			11.8			5.4			12.6
Provision (benefit) for income taxes		(0.2	)		0.5			0.1			0.4

Net income		3.8	%		11.3	%		5.3	%		12.2	%

The following table presents details of total stock-based compensation expense as a percentage of net revenueincludedin each functional line item in the condensed consolidated statements of income data above:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Cost of revenue		0.8	%		0.8	%		0.7	%		0.7	%
Research and development		10.1			9.2			9.4			8.5
Selling, general and administrative		4.1			4.1			3.8			3.8

Net Revenue, Cost of Revenue and Gross Profit

The following tables present net revenue, cost of revenue and gross profit for the three and six months ended June 30, 2007 and 2006:


	Three Months Ended					Three Months Ended
	June 30, 2007					June 30, 2006
			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change
	(In thousands, except percentages)

Net revenue	$	897,920		100.0	%	$	941,131		100.0	%	$	(43,211	)		(4.6	)%
Cost of revenue		437,037		48.7			457,374		48.6			(20,337	)		(4.4	)

Gross profit	$	460,883		51.3	%	$	483,757		51.4	%	$	(22,874	)		(4.7	)


	Six Months Ended					Six Months Ended
	June 30, 2007					June 30, 2006
			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change
	(In thousands, except percentages)

Net revenue	$	1,799,401		100.0	%	$	1,841,778		100.0	%	$	(42,377	)		(2.3	)%
Cost of revenue		877,986		48.8			891,583		48.4			(13,597	)		(1.5	)

Gross profit	$	921,415		51.2	%	$	950,195		51.6	%	$	(28,780	)		(3.0	)

Net Revenue. Our revenue is generated principally by sales of our semiconductor products. Net revenue is revenue less reductions for rebates and provisions for returns and allowances. The following table presents net revenue from each of our major target markets and its respective contribution to net revenue in the three months ended June 30, 2007 as compared to the three months ended June 30, 2006:


	Three Months Ended					Three Months Ended
	June 30, 2007					June 30, 2006
			% of Net					% of Net						%
	Amount		Revenue			Amount		Revenue			Decrease			Change
	(In thousands, except percentages)

Broadband communications	$	347,995		38.8	%	$	357,103		37.9	%	$	(9,108	)		(2.6	)%
Enterprise networking		283,733		31.6			305,213		32.5			(21,480	)		(7.0	)
Mobile and wireless		266,192		29.6			278,815		29.6			(12,623	)		(4.5	)

Net revenue	$	897,920		100.0	%	$	941,131		100.0	%	$	(43,211	)		(4.6	)

Our broadband communications products include solutions for cable modems, DSL applications, digital cable, direct broadcast satellite and IP set-top boxes, digital TVs and high definition DVD and personal video recording devices. Our enterprise networking products include Ethernet transceivers, controllers, switches, broadband network and security processors and server chipsets. Our mobile and wireless products include wireless LAN, cellular, Bluetooth, mobile multimedia and applications processors, mobile power management and VoIP solutions.

The decrease in net revenue from our broadband communications target market resulted from a decrease in net revenue for our solutions for DSL applications, offset in part by an increase in net revenue for our solutions for direct broadcast satellite set-top boxes. The decrease in net revenue from our enterprise networking target market resulted primarily from a decrease in net revenue attributable to our controller products. The decrease in net revenue from our mobile and wireless target market resulted primarily from a decrease in demand for our cellular and wireless LAN product offerings, offset in part by an increase in demand for our Bluetooth product offerings.

The following table presents net revenue from each of our major target markets and its respective contribution to net revenue in the six months ended June 30, 2007 as compared to the six months ended June 30, 2006:


	Six Months Ended					Six Months Ended
	June 30, 2007					June 30, 2006
			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change
	(In thousands, except percentages)

Broadband communications	$	697,290		38.8	%	$	688,255		37.4	%	$	9,035			1.3	%
Enterprise networking		561,681		31.2			610,803		33.1			(49,122	)		(8.0	)
Mobile and wireless		540,430		30.0			542,720		29.5			(2,290	)		(0.4	)

Net revenue	$	1,799,401		100.0	%	$	1,841,778		100.0	%	$	(42,377	)		(2.3	)

The increase in net revenue in our broadband communications target market resulted from an increase in net revenue for our solutions for digital TVs, direct broadcast satellite set-top boxes and cable modems, offset by a decrease in net revenue from our solutions for DSL applications and digital cable set-top boxes. The decrease in net revenue from our enterprise networking target market resulted primarily from a decrease in net revenue from

our controller and Ethernet switch products. The decrease in net revenue from our mobile and wireless target market resulted primarily from a decrease in demand for our cellular and mobile multimedia product offerings, offset in part by an increase in demand for our Bluetooth product offerings in the first three months of the year.

The following table presents net revenue from each of our major target markets and its respective contribution to net revenue in the three months ended June 30, 2007 as compared to the three months ended March 31, 2007:


	Three Months Ended					Three Months Ended
	June 30, 2007					March 31, 2007
			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change
	(In thousands, except percentages)

Broadband communications	$	347,995		38.8	%	$	349,295		38.7	%	$	(1,300	)		(0.4	)%
Enterprise networking		283,733		31.6			277,948		30.9			5,785			2.1
Mobile and wireless		266,192		29.6			274,238		30.4			(8,046	)		(2.9	)

Net revenue	$	897,920		100.0	%	$	901,481		100.0	%	$	(3,561	)		(0.4	)

The decrease in net revenue in our broadband communications target market resulted from a decrease in net revenue for our solutions for cable modems, offset in part by an increase in net revenue from our solutions for digital cable set-top boxes. The increase in net revenue from our enterprise networking target market resulted primarily from an increase in net revenue from our Ethernet switch products. The decrease in net revenue from our mobile and wireless target market resulted primarily from a decrease in demand for our Bluetooth product offerings from one of our major customers, offset in part by an increase in wireless LAN and mobile multimedia product offerings.

We currently anticipate that total net revenue in the three months ending September 30, 2007 will be approximately $915.0 million to $940.0 million, as compared to the $897.9 million achieved in the three months ended June 30, 2007.

We recorded rebates to certain customers in the amounts of $51.6 million and $56.8 million in the three months ended June 30, 2007 and 2006, respectively, and $115.8 million and $111.1 million in the six months ended June 30, 2007 and 2006, respectively. We account for rebates in accordance with FASB Emerging Issues Task Force IssueNo. 01-9,Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products), and, accordingly, record reductions to revenue for rebates in the same period that the related revenue is recorded. The amount of these reductions is based upon the terms included in our various rebate agreements. Historically, reversals of rebate accruals have not been material. We anticipate that accrued rebates will vary in future periods based upon the level of overall sales to customers that participate in our rebate programs and as specific rebate programs contractually end and unclaimed rebates are no longer subject to payment. However, we do not expect rebates to impact our gross margin as our revenue from sales to these customers is reported net of such rebates.

Cost of Revenue and Gross Profit. Cost of revenue includes the cost of purchasing finished silicon wafers manufactured by independent foundries, costs associated with our purchase of assembly, test and quality assurance services and packaging materials for semiconductor products, amortization of purchased technology, and manufacturing overhead, including costs of personnel and equipment associated with manufacturing support, product warranty costs, provisions for excess or obsolete inventories, and stock-based compensation expense for personnel engaged in manufacturing support.

Gross profit in the three and six months ended June 30, 2007 as compared to the three and six months ended June 30, 2006 decreased slightly due to relatively flat net revenue and a slight decrease in gross margin. Gross margin decreased from 51.4% in the three months ended June 30, 2006 to 51.3% in the three months ended June 30, 2007. Gross margin decreased from 51.6% in the six months ended June 30, 2006 to 51.2% in the six months ended June 30, 2007. The primary factors that contributed to the decreases in gross margin were an increase in provisions for excess or obsolete inventory, offset in part by an increase in product margin due to a reduction in manufacturing costs. For a discussion of stock-based compensation included in cost of revenue, see “Stock-Based Compensation Expense,” below.

Gross margin has been and will likely continue to be impacted by our product mix and volume of product sales, including sales to high volume customers, competitive pricing programs, fluctuations in silicon wafer costs and assembly, packaging and testing costs, competitive pricing requirements, product warranty costs, provisions for excess and obsolete inventories, the position of our products in their respective life cycles, and the introduction of products with lower margins, among other factors. We anticipate that our gross margin in the three months ending September 30, 2007 will decrease slightly as compared to the three months ended June 30, 2007 as a result of the introduction of new products to new and existing customers. Our gross margin may also be impacted by additional stock-based compensation expense and changes therein, as discussed below, and the amortization of purchased intangible assets related to future acquisitions.

Research and Development and Selling, General and Administrative Expenses

The following tables present research and development and selling, general and administrative expenses for the three and six months ended June 30, 2007 and 2006:


	Three Months Ended					Three Months Ended
	June 30, 2007					June 30, 2006
			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change
	(In thousands, except percentages)

Research and development	$	332,130		37.0	%	$	280,024		29.7	%	$	52,106			18.6	%
Selling, general and administrative		119,859		13.4			121,982		13.0			(2,123	)		(1.7	)


	Six Months Ended					Six Months Ended
	June 30, 2007					June 30, 2006
			% of Net					% of Net					%
	Amount		Revenue			Amount		Revenue			Increase		Change
	(In thousands, except percentages)

Research and development	$	632,940		35.2	%	$	531,718		28.9	%	$	101,222		19.0	%
Selling, general and administrative		248,506		13.8			234,881		12.7			13,625		5.8

Research and Development Expense. Research and development expense consists primarily of salaries and related costs of employees engaged in research, design and development activities, including stock-based compensation expense, costs related to engineering design tools and computer hardware, mask and prototyping costs, subcontracting costs and facilities expenses.

The increase in research and development expense in the three and six months ended June 30, 2007 as compared to the three and six months ended June 30, 2006 resulted primarily from an increase of $29.0 million and $56.8 million, respectively, in personnel-related expenses and an increase of $4.4 million and $12.8 million, respectively, in stock-based compensation expense. These increases are primarily attributable to (i) an increase in the number of employees engaged in research and development activities since June 30, 2006, resulting from both direct hiring and acquisitions, and (ii) an increase in cash compensation levels since June 30, 2006 due to our annual merit increase cycle. For a further discussion of stock-based compensation included in research and development expense, see “Stock-Based Compensation Expense,” below.

Based upon past experience, we anticipate that research and development expense will continue to increase over the long term as a result of growth in, and the diversification of, the markets we serve, new product opportunities, changes in our compensation policies, and any expansion into new markets and technologies. We anticipate that research and development expense in the three months ending September 30, 2007 will increase from the $332.1 million incurred in the three months ended June 30, 2007 due to our continued investment in new products and 65 nanometer process technology, as well as additional expenses related to additional hiring of personnel and our recent acquisitions of Octalica, Inc. and Global Locate, Inc.

We remain committed to significant research and development efforts to extend our technology leadership in the wired and wireless communications markets in which we operate. We currently hold more than 2,200 U.S. and

900 foreign patents, and we maintain an active program of filing for and acquiring additional U.S. and foreign patents in wired and wireless communications and other fields.

Selling, General and Administrative Expense. Selling, general and administrative expense consists primarily of personnel-related expenses, including stock-based compensation expense, legal and other professional fees, facilities expenses and communications expenses.

The decrease in selling, general and administrative expense in the three months ended June 30, 2007 as compared to the three months ended June 30, 2006 resulted primarily from a decrease of $7.3 million in legal fees, offset in part by a $4.8 million increase in personnel-related expenses. The increase in selling, general and administrative expense in the six months ended June 30, 2007 as compared to the six months ended June 30, 2006 resulted primarily from an increase of $9.6 million in personnel-related expenses. These changes are primarily attributable to (i) the timing and costs of ongoing litigation, (ii) an increase in the number of employees engaged in selling, general and administrative activities since June 30, 2006, and (iii) an increase in cash compensation levels since June 30, 2006 due to our annual merit increase cycle. For a discussion of stock-based compensation included in selling, general and administrative expense, see “Stock-Based Compensation Expense,” below. For further discussion of litigation matters, see Note 7 of Notes to Unaudited Condensed Consolidated Financial Statements.

Based upon past experience, we anticipate that selling, general and administrative expense will continue to increase over the long term resulting from any expansion of our operations through periodic changes in our infrastructure, changes in our compensation policies, acquisition and integration activities, international operations, and current and future litigation. We anticipate that selling, general and administrative expense in the three months ending September 30, 2007 will be slightly higher as compared to the $119.9 million incurred in the three months ended June 30, 2007.

Stock-Based Compensation Expense

The following table presents details of total stock-based compensation expense that isincludedin each functional line item in our unaudited condensed consolidated statements of income:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(In thousands)

Cost of revenue	$	6,861	$	7,105	$	12,675	$	13,391
Research and development		90,832		86,420		169,263		156,425
Selling, general and administrative		36,607		38,940		69,233		70,635

The amount of unearned stock-based compensation currently estimated to be expensed from 2007 through 2011 related to unvested share-based payment awards at June 30, 2007 is $1.144 billion. Of this amount, $265.1 million, $399.5 million, $285.9 million, $155.4 million and $38.4 million are currently estimated to be recorded in the remainder of 2007, in 2008, 2009, 2010 and 2011, respectively. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is approximately 1.5 years. Approximately 97% of the total unearned stock-based compensation at June 30, 2007 will be expensed by the end of 2010. The increase in unearned stock-based compensation of $314.4 million at June 30, 2007 from the $829.9 million balance at December 31, 2006 was primarily the result of Broadcom granting employee stock options to purchase 14.6 million shares of our common stock and awarding 7.4 million restricted stock units in the three months ended June 30, 2007 as part of our regular annual equity compensation review program, offset in part by stock-based compensation of $251.2 million expensed during the six months ended June 30, 2007. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional equity awards to employees or assume unvested equity awards in connection with acquisitions.

Charges Related to the Voluntary Review of our Equity Award Practices

In connection with our equity award review completed in January 2007, we determined the accounting measurement dates for most of our options granted between June 1998 and May 2003 covering options to purchase 232.9 million shares of our Class A or Class B common stock, differed from the measurement dates previously used for such awards. As a result, there are potential adverse tax consequences that may apply to holders of affected options. By amending or replacing those options, the potential adverse tax consequences could be eliminated.

In March 2007 we offered to amend or replace affected options by adjusting the exercise price of each such option to the lower of (i) the fair market value per share of our Class A common stock on the revised measurement date applied to that option as a result of our equity award review and (ii) the closing selling price per share of our Class A common stock on the date on which the option is amended. If the adjusted exercise price for an affected option waslower thanthe original exercise price, that option was not amended but instead was replaced with a new option that had the same exercise price, vesting schedule and expiration date as the affected option, but a new grant date. The offer expired April 20, 2007. Participants whose options were amended pursuant to the offer are entitled to a special cash payment with respect to those options. The amount payable will be determined by multiplying (i) the amount of the increase in exercise price by (ii) the number of shares for which options were amended. We will make payments of approximately $29.6 million in January 2008 to reimburse the affected employees for the increases in their exercise prices. A liability has been recorded for these payments and is included in wages and related benefits as of June 30, 2007.

In accordance with SFAS 123R, we recorded total estimated charges of $3.4 million in the six months ended June 30, 2007 and a reduction of additional paid-in capital in the amount of $26.2 million in connection with this offer. A total of $0.1 million, $1.5 million and $1.8 million is included in cost of revenue, research and development expense and selling, general and administrative expense, respectively, as wages and related benefits for the six months ended June 30, 2007.

Amortization of Purchased Intangible Assets

The following table presents details of the amortization of purchased intangible assetsincludedin each expense category above:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
	(In thousands)

Cost of revenue	$	2,566	$	2,744	$	5,616	$	5,725
Operating expense		200		605		529		1,688

	$	2,766	$	3,349	$	6,145	$	7,413

The following table presents details of the Company’s future amortization of purchase intangible assets. If we acquire additional purchased intangible assets in the future, our cost of revenue or operating expenses will be increased by the amortization of those assets.


	Purchased Intangible Assets Amortization by Year
	Remainder
	of 2007		2008		2009		2010		2011		Thereafter		Total
	(In thousands)

Cost of revenue	$	5,133	$	10,265	$	10,265	$	10,265	$	1,023	$	—	$	36,951
Operating expense		378		733		622		600		100		—		2,433

	$	5,511	$	10,998	$	10,887	$	10,865	$	1,123	$	—	$	39,384

In-Process Research and Development

In the six months ended June 30, 2007 and 2006, we recorded IPR&D of $10.5 million and $5.2 million, respectively. The amounts allocated to IPR&D in the six months ended June 30, 2007 and 2006 were determined through established valuation techniques used in the high technology industry and were expensed upon acquisition as it was determined that the underlying projects had not reached technological feasibility and no alternative future uses existed.

Interest and Other Income (Expense), Net

The following tables present interest and other income, net, for the three and six months ended June 30, 2007 and 2006:


	Three Months Ended					Three Months Ended
	June 30, 2007					June 30, 2006
			% of Net					% of Net			Increase			%
	Amount		Revenue			Amount		Revenue			(Decrease)			Change
	(In thousands, except percentages)

Interest income, net	$	32,904		3.7	%	$	28,194		3.0	%	$	4,710			16.7	%
Other income (expense), net		642		0.1			1,448		0.2			(806	)		(55.7	)


	Six Months Ended						Six Months Ended
	June 30, 2007						June 30, 2006
				% of Net					% of Net			Increase			%
	Amount			Revenue			Amount		Revenue			(Decrease)			Change
	(In thousands, except percentages)

Interest income, net	$	69,912			3.9	%	$	51,932		2.8	%	$	17,980			34.6	%
Other income (expense), net		(767	)		(0.0	)		3,219		0.2			(3,986	)		(123.8	)

Interest income, net, reflects interest earned on cash and cash equivalents and marketable securities balances. Other income (expense), net, primarily includes recorded gains and losses on strategic investments as well as gains and losses on foreign currency transactions and dispositions of property and equipment. The increase in interest income, net, was the result of the overall increase in our average cash and marketable securities balances and an increase in market interest rates. Our cash and marketable securities balances increased from $2.377 billion at June 30, 2006 to $2.481 billion at June 30, 2007. The weighted average interest rates earned for the three months ended June 30, 2007 and 2006 were 5.22% and 4.76%, respectively. The weighted average interest rates earned for the six months ended June 30, 2007 and 2006 were 5.22% and 4.58%, respectively.

Provision for Income Taxes

We recorded a tax benefit of $2.2 million and a tax provision of $1.3 million for the three and six months ended June 30, 2007, respectively, and tax provisions of $4.7 million and $8.1 million for the three and six months ended June 30, 2006, respectively. Our effective tax rates were (6.9)% and 1.4% for the three and six months ended June 30, 2007, respectively, and 4.2% and 3.5% for the three and six months ended June 30, 2006, respectively. The difference between our effective tax rates and the 35% federal statutory rate resulted primarily from domestic losses recorded without income tax benefit and foreign earnings taxed at rates lower than the federal statutory rate for the three and six months ended June 30, 2007 and June 30, 2006. In addition, the Company recorded $4.6 million of tax benefits for the three and six months ended June 30, 2007, resulting primarily from the expiration of the statutes of limitations for the assessment of taxes in various foreign jurisdictions.

As a result of applying the provisions of FIN 48, we recognized a decrease of $3.9 million in the liability for unrecognized tax benefits, and a $4.7 million increase in retained earnings, as of January 1, 2007. Our unrecognized tax benefits totaled $36.5 million at January 1, 2007 and relate to various foreign jurisdictions. This amount included $14.5 million of potential penalties and $1.1 million of interest. Included in the balance at January 1, 2007 are $34.3 million of tax benefits that, if recognized, would reduce our annual effective income tax rate. We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2003 through 2007 tax years generally remain subject to examination by U.S. federal and most state tax authorities. In significant foreign jurisdictions, the 2001 through 2007 tax years generally remain subject to examination by tax authorities.

Liquidity and Capital Resources

Working Capital and Cash and Marketable Securities. The following table presents working capital and cash and marketable securities:


	June 30,		December 31,
	2007		2006		Decrease
	(In thousands)

Working capital	$	2,406,242	$	2,673,087	$	(266,845	)

Cash and cash equivalents(1)	$	2,044,337	$	2,158,110	$	(113,773	)
Short-term marketable securities(1)		370,336		522,340		(152,004	)
Long-term marketable securities		66,116		121,148		(55,032	)

	$	2,480,789	$	2,801,598	$	(320,809	)


(1)		Included in working capital.

Our working capital and cash and marketable securities decreased in the six months ended June 30, 2007 due primarily to repurchases of shares of our Class A common stock, partially offset by cash generated from operating and investing activities.

Cash Provided and Used in the Six Months Ended June 31, 2007 and 2006. Cash and cash equivalents decreased to $2.044 billion at June 30, 2007 from $2.158 billion at December 31, 2006 as a result of cash used in financing activities (primarily stock repurchases), offset in part by cash provided by operating and investing activities.

In the six months ended June 30, 2007 our operating activities provided $403.1 million in cash. This was primarily the result of $95.2 million in net income, $301.0 million in net non-cash operating expenses and $6.9 million in net cash provided by changes in operating assets and liabilities. Non-cash items included in net income in the six months ended June 30, 2007 included depreciation and amortization, stock-based compensation expense, amortization of purchased intangible assets, IPR&D, impairment of intangible assets and loss on strategic investments. In the six months ended June 30, 2006 our operating activities provided $377.0 million in cash. This was primarily the result of $223.8 million in net income and $275.7 million in net non-cash operating expenses offset in part by $122.5 million in net cash used by changes in operating assets and liabilities. Non-cash items included in net income in the six months ended June 30, 2006 included depreciation and amortization, stock-based compensation expense, amortization of purchased intangible assets and IPR&D.

Accounts receivable decreased $0.5 million from $382.8 million at December 31, 2006 to $382.3 million at June 30, 2007. We typically bill customers on an open account basis subject to our standard net thirty day payment terms. If, in the longer term, our revenue increases, it is likely that our accounts receivable balance will also increase. Our accounts receivable could also increase if customers delay their payments or if we grant extended payment terms to customers.

Inventories decreased $11.5 million from $202.8 million at December 31, 2006 to $191.3 million at June 30, 2007. In the future, our inventory levels will continue to be determined based upon the level of purchase orders we receive and the stage at which our products are in their respective product life cycles, our ability, as well as the ability of our customers, to manage inventory under hubbing arrangements, as well as competitive situations in the marketplace. Such considerations are balanced against the risk of obsolescence or potentially excess inventory levels.

Investing activities provided cash of $18.5 million in the six months ended June 30, 2007, which was primarily the result of $207.0 million provided by the net proceeds from maturities of marketable securities and proceeds of $14.0 million received in connection with an escrow settlement from our acquisition of Siliquent

Technologies, Inc., offset in part by the purchase of $107.4 million of capital equipment to support our operations and the build out and relocation of our facilities in Irvine, California, $92.0 million net cash paid for the acquisitions of LVL7 and Octalica, and the net purchase of $3.2 million of strategic investments. Investing activities used $205.6 million in cash in the six months ended June 30, 2006, which was primarily the result of $67.9 million of net cash paid for the acquisition of Sandburst, the purchase of $37.2 million of capital equipment to support operations, and $100.6 million used in the net purchase of marketable securities.

Our financing activities used $535.4 million in cash in the six months ended June 30, 2007, which was primarily the result of $641.3 million in repurchases of shares of our Class A common stock pursuant to our new share repurchase program implemented in February 2007, offset in part by $105.9 million in net proceeds received from issuances of common stock upon exercise of stock options and pursuant to our employee stock purchase plan. An additional $13.2 million of repurchases of our Class A common stock was not settled in cash as of June 30, 2007. Our financing activities provided $229.7 million in cash in the six months ended June 30, 2006, which was primarily the result of $477.7 million in net proceeds received from issuances of common stock upon exercise of stock options and common stock purchases through our employee stock purchase plan, which was offset in part by $246.1 million in repurchases of shares of our Class A common stock pursuant to our previous share repurchase program.

In February 2007 our Board of Directors authorized a new program to repurchase shares of our Class A common stock for cash. The Board approved the repurchase of shares having an aggregate market value of up to $1.0 billion, depending on market conditions and other factors. Repurchases under the program may be made at any time and from time to time during the 18 month period that commenced February 12, 2007. Repurchases under the program have been and will continue to be made in open market or privately negotiated transactions.

Due to the decrease in the price of our Class A common stock as compared to the previous year, fewer stock options were exercised by employees, and we received reduced proceeds from the exercise of stock options in the six months ended June 30, 2007 than during the six months ended June 30, 2006. The timing and number of stock option exercises and the amount of cash proceeds we receive through those exercises are not within our control. Moreover, it is now our practice to issue a combination of restricted stock units and stock options to employees, which will reduce the number of stock options available for exercise in the future. Unlike the exercise of stock options, the issuance of shares upon vesting of restricted stock units does not result in any cash proceeds to Broadcom and requires the use of cash as we allow employees to elect to have a portion of the shares issuable upon vesting of restricted stock units during 2007 withheld to satisfy withholding taxes and to make corresponding cash payments to the appropriate tax authorities on each employee’s behalf.

Prospective Capital Needs. We believe that our existing cash, cash equivalents and marketable securities, together with cash generated from operations and from the exercise of employee stock options and the purchase of common stock through our employee stock purchase plan, will be sufficient to cover our working capital needs, capital expenditures, investment requirements, commitments and repurchases of our Class A common stock for at least the next 12 months. However, it is possible that we may need to raise additional funds to finance our activities beyond the next 12 months or to consummate acquisitions of other businesses, assets, products or technologies. We could raise such funds by curtailing repurchases of our Class A common stock, selling equity or debt securities to the public or to selected investors, or by borrowing money from financial institutions. In addition, even though we may not need additional funds, we may still elect to sell additional equity or debt securities or obtain credit facilities for other reasons. We have filed a universal shelf registration statement on SECForm S-3 that allows us to sell in one or more public offerings, shares of our Class A common stock, shares of preferred stock or debt securities, or any combination of such securities, for proceeds in an aggregate amount of up to $750 million. We have not issued any securities under the universal shelf registration statement. Because one of the eligibility requirements for use of aForm S-3 is that an issuer must have timely filed all reports required to be filed during the preceding twelve calendar months, we will not be able to issue shares under theForm S-3 until December 1, 2007. If we elect to raise additional funds, we may not be able to obtain such funds on a timely basis on acceptable terms, if at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing shareholders would be reduced. In addition, the equity or debt securities that we issue may have rights, preferences or privileges senior to those of our common stock.

Although we believe that we have sufficient capital to fund our activities for at least the next 12 months, our future capital requirements may vary materially from those now planned. We anticipate that the amount of capital we will need in the future will depend on many factors, including:


	•	the overall levels of sales of our products and gross profit margins;

	•	our business, product, capital expenditure and research and development plans, and product and technology roadmaps;

	•	the market acceptance of our products;

	•	repurchases of our Class A common stock;

	•	litigation expenses, settlements and judgments;

	•	volume price discounts and customer rebates;

	•	the levels of inventory and accounts receivable that we maintain;

	•	acquisitions of other businesses, assets, products or technologies;

	•	changes in our compensation policies;

	•	issuance of restricted stock units and the related cash payments for withholding taxes due from employees during 2007 and possibly during future years;

	•	capital improvements for new and existing facilities;

	•	technological advances;

	•	our competitors’ responses to our products;

	•	our relationships with suppliers and customers;

	•	the availability of sufficient foundry, assembly and test capacity and packaging materials;

	•	expenses related to our restructuring plans;

	•	the level of exercises of stock options and stock purchases under our employee stock purchase plan; and

	•	general economic conditions and specific conditions in the semiconductor industry and wired and wireless communications markets, including the effects of recent international conflicts and related uncertainties.

In addition, we may require additional capital to accommodate planned future growth, hiring, infrastructure and facility needs.


Item 3.	*Quantitative and Qualitative Disclosures about Market Risk*

We maintain an investment portfolio of various holdings, types and maturities. We do not use derivative financial instruments. We place our cash investments in instruments that meet high credit quality standards, as specified in our investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument.

Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of June 30, 2007 the carrying value of our cash and cash equivalents approximated fair value.

Marketable securities, consisting of U.S. Treasury and agency obligations, commercial paper, corporate notes and bonds, time deposits, foreign notes and certificates of deposits, are generally classified as held-to-maturity and are stated at cost, adjusted for amortization of premiums and discounts to maturity. In the past certain of our short term marketable securities were classified as available-for-sale and were stated at fair value, which was equal to cost due to the short-term maturity of these securities. In the event that there were to be a difference between fair value and cost in any of our available-for-sale securities, unrealized gains and losses on these investments would be reported as a separate component of accumulated other comprehensive income (loss).

Our investment policy for marketable securities requires that all securities mature in three years or less, with a weighted average maturity of no longer than 18 months. As of June 30, 2007 the carrying value and fair value of these securities were $436.5 million and $435.9 million, respectively. The fair value of our marketable securities fluctuates based on changes in market conditions and interest rates; however, given the short-term maturities, we do not believe these instruments are subject to significant market or interest rate risk.

Investments in fixed rate interest-earning instruments carry a degree of interest rate risk. Fixed rate securities may have their market value adversely impacted due to rising interest rates. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates.

The carrying value, maturity and estimated fair value of our cash equivalents and marketable securities as of June 30, 2007 and December 31, 2006 were as follows:


	Carrying
	Value												Fair Value
	June 30,			Maturity									June 30,
	2007			2007			2008			2009			2007
	(In thousands, except interest rates)

Investments
Cash equivalents	$	1,172,715		$	1,172,715		$	—		$	—		$	1,172,714
Weighted average yield		5.29	%		5.29	%		—			—
Marketable securities	$	436,452		$	274,551		$	120,683		$	41,218		$	435,879
Weighted average yield		5.11	%		5.10	%		5.05	%		5.37	%


	Carrying
	Value												Fair Value
	December 31,			Maturity									December 31,
	2006			2007			2008			2009			2006
	(In thousands, except interest rates)

Investments
Cash equivalents	$	908,777		$	908,777		$	—		$	—		$	908,781
Weighted average yield		5.31	%		5.31	%		—			—
Marketable securities	$	643,488		$	522,340		$	81,863		$	39,285		$	642,528
Weighted average yield		5.04	%		5.03	%		4.97	%		5.32	%

We have invested in privately held companies, the majority of which can still be considered to be in thestart-up or development stage. We make investments in key strategic businesses and other industry participants to establish strategic relationships, expand existing relationships, and achieve a return on our investment. These investments are inherently risky, as the markets for the technologies or products these companies have under development are typically in early stages and may never materialize. Likewise, the development projects of these companies may not be successful. In addition, early stage companies often fail for various other reasons. Consequently, we could lose our entire investment in these companies. As of June 30, 2007, the carrying and fair value of our strategic investments was $6.6 million.


Item 4.	*Controls and Procedures*

We are committed to maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures and implementing controls and procedures based on the application of management’s judgment.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined underRule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2007, the end of the period covered by this Report.

There has been no change in our internal control over financial reporting during the three months ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.


Item 4T.	*Controls and Procedures*

Not applicable.

PART II. OTHER INFORMATION


Item 1.	*Legal Proceedings*

The information set forth under Note 7 of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, is incorporated herein by reference.


Item 1A.	*Risk Factors*

Our quarterly operating results may fluctuate significantly. As a result, we may fail to meet the expectations of securities analysts and investors, which could cause our stock price to decline.

Our quarterly net revenue and operating results have fluctuated significantly in the past and are likely to continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. If our operating results do not meet the expectations of securities analysts or investors, who may derive their expectations by extrapolating data from recent historical operating results, the market price of our Class A common stock will likely decline. Fluctuations in our operating results may be due to a number of factors, including, but not limited to, those listed below and those identified throughout this “Risk Factors” section:


	•	the overall cyclicality of, and changing economic, political and market conditions affecting the semiconductor industry and wired and wireless communications markets, including seasonality in sales of consumer products into which our products are incorporated;

	•	the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;

	•	the gain or loss of a key customer, design win or order;


	•	our ability to scale our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers;

	•	our dependence on a few significant customers for a substantial portion of our revenue;

	•	our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner;

	•	our ability to timely and accurately predict market requirements and evolving industry standards and to identify and capitalize upon opportunities in new markets;

	•	intellectual property disputes, customer indemnification claims and other types of litigation risks;

	•	our ability to timely and effectively transition to smaller geometry process technologies or achieve higher levels of design integration;

	•	our ability to retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels that we need to implement our business and product plans;

	•	the rate at which our present and future customers and end users adopt our technologies and products in our target markets;

	•	changes in our product or customer mix;

	•	the availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials;

	•	competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products;

	•	the volume of our product sales and pricing concessions on volume sales; and

	•	the effects of public health emergencies, natural disasters, terrorist activities, international conflicts and other events beyond our control.

We expect new product lines to continue to account for a high percentage of our future sales. Some of these markets are immatureand/or unpredictable or are new markets for Broadcom, and we cannot assure you that these markets will develop into significant opportunities or that we will continue to derive significant revenue from these markets. Based on the limited amount of historical data available to us, it is difficult to anticipate our future revenue streams from, or the sustainability of, such newer markets.

Additionally, as an increasing number of our chips are being incorporated into consumer products, such as desktop and notebook computers, cellular phones and other mobile communication devices, other wireless-enabled consumer electronics, and satellite and digital cable set-top boxes, we anticipate greater seasonality and fluctuations in the demand for our products, which may result in greater variations in our quarterly operating results.

We are subject to order and shipment uncertainties, and our ability to accurately forecast customer demand may be impaired by our lengthy sales cycle. If we are unable to accurately predict customer demand, we may hold excess or obsolete inventory, which would reduce our profit margin. Conversely, we may have insufficient inventory, which would result in lost revenue opportunities and potentially in loss of market share and damaged customer relationships.

We typically sell products pursuant to purchase orders rather than long-term purchase commitments. Customers can generally cancel or defer purchase orders on short notice without incurring a significant penalty. In the recent past, some of our customers have developed excess inventories of their own products and have, as a consequence, deferred purchase orders for our products. We currently do not have the ability to accurately predict what or how many products our customers will need in the future. Anticipating demand is difficult because our customers face volatile pricing and unpredictable demand for their own products, are increasingly focused more on cash preservation and tighter inventory management, and may be involved in legal proceedings that could affect

their ability to buy our products. Our ability to accurately forecast customer demand may also be impaired by the delays inherent in our lengthy sales cycle. After we have developed and delivered a product to a customer, the customer will usually test and evaluate our product prior to designing its own equipment to incorporate our product. Our customers may need three to more than six months to test, evaluate and adopt our product and an additional three to more than nine months to begin volume production of equipment that incorporates our product. Due to this lengthy sales cycle, we may experience significant delays from the time we increase our operating expenses and make investments in inventory until the time that we generate revenue from these products. It is possible that we may never generate any revenue from these products after incurring such expenditures. Even if a customer selects our product to incorporate into its equipment, we have no assurance that the customer will ultimately market and sell its equipment or that such efforts by our customer will be successful. The delays inherent in our lengthy sales cycle increase the risk that a customer will decide to cancel or curtail, reduce or delay its product plans. If we incur significant research and development expenses, marketing expenses and investments in inventory in the future that we are not able to recover, and we are not able to compensate for those expenses, our operating results could be adversely affected. In addition, as an increasing number of our chips are being incorporated into consumer products, we anticipate greater fluctuations in demand for our products, which makes it even more difficult to forecast customer demand.

We place orders with our suppliers based on forecasts of customer demand and, in some instances, may establish buffer inventories to accommodate anticipated demand. Our forecasts are based on multiple assumptions, each of which may introduce error into our estimates. If we overestimate customer demand, we may allocate resources to manufacturing products that we may not be able to sell when we expect to, if at all. As a result, we would hold excess or obsolete inventory, which would reduce our profit margins and adversely affect our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would forego revenue opportunities and potentially lose market share and damage our customer relationships. In addition, any future significant cancellations or deferrals of product orders or the return of previously sold products could materially and adversely affect our profit margins, increase product obsolescence and restrict our ability to fund our operations. Furthermore, we generally recognize revenue upon shipment of products to a customer. If a customer refuses to accept shipped products or does not timely pay for these products, we could incur significant charges against our income.

We maintain inventory, or hubbing, arrangements with certain of our customers. While we have not shipped a significant amount of product under those arrangements as of June 30, 2007, we anticipate that such amount will increase in the near future. Pursuant to these arrangements, we deliver products to a customer or a designated third party warehouse based upon the customer’s projected needs, but do not recognize product revenue unless and until the customer reports that it has removed our product from the warehouse to incorporate into its end products. Historically we have had good visibility into customer requirements and shipments within a quarter. However, if a customer does not take our products under a hubbing arrangement in accordance with the schedule it originally provided us, our predicted future revenue stream could vary substantially from our forecasts and our results of operations could be materially and adversely affected. Additionally, since we own inventory that is physically located in a third party’s warehouse, our ability to effectively manage inventory levels may be impaired, causing our total inventory turns to decrease, which could increase expenses associated with excess and obsolete product and negatively impact our cash flow.

Our operating results may be adversely impacted by worldwide political and economic uncertainties and specific conditions in the markets we address, including the cyclical nature of and volatility in the semiconductor industry. As a result, the market price of our Class A common stock may decline.

We operate primarily in the semiconductor industry, which is cyclical and subject to rapid change and evolving industry standards. From time to time, the semiconductor industry has experienced significant downturns. These downturns are characterized by decreases in product demand, excess customer inventories, and accelerated erosion of prices. These factors could cause substantial fluctuations in our revenue and in our results of operations. Any downturns in the semiconductor industry may be severe and prolonged, and any failure of the industry or wired and wireless communications markets to fully recover from downturns could seriously impact our revenue and harm our business, financial condition and results of operations. The semiconductor industry also periodically

experiences increased demand and production capacity constraints, which may affect our ability to ship products. Accordingly, our operating results may vary significantly as a result of the general conditions in the semiconductor industry, which could cause large fluctuations in our stock price.

Additionally, in the recent past, general worldwide economic conditions have experienced a downturn due to slower economic activity, concerns about inflation and deflation, increased energy costs, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns in the wired and wireless communications markets, the ongoing effects of the war in Iraq, recent international conflicts and terrorist and military activity, and the impact of natural disasters and public health emergencies. These conditions make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses to slow spending on our products and services, which would delay and lengthen sales cycles. We experienced slowdowns in orders in the second half of 2006 and in the fourth quarter of 2004 that we believe were attributable in substantial part to excess inventory held by certain of our customers, and we may experience a similar slowdown in the future. We cannot predict the timing, strength or duration of any economic recovery, worldwide, or in the wired and wireless communications markets. If the economy or the wired and wireless communications markets in which we operate do not continue at their present levels, our business, financial condition and results of operations will likely be materially and adversely affected.

If we fail to appropriately scale our operations in response to changes in demand for our existing products and services or to the demand for new products requested by our customers, our business could be materially and adversely affected.

To achieve our business objectives, we anticipate that we will need to continue to expand. Through internal growth and acquisitions, we significantly increased the scope of our operations and expanded our workforce from 2,580 full-time, contract and temporary employees as of December 31, 2002 to 5,827 full-time, contract and temporary employees as of June 30, 2007. Nonetheless, we may not be able to expand our workforce and operations in a sufficiently timely manner to respond effectively to changes in demand for our existing products and services or to the demand for new products requested by our customers. In that event, we may be unable to meet competitive challenges or exploit potential market opportunities, and our current or future business could be materially and adversely affected.

Conversely, if we expand our operations and workforce too rapidly in anticipation of increased demand for our products, and such demand does not materialize at the pace at which we expect, the rate of increase in our operating expenses may exceed the rate of increase, if any, in our revenue. Moreover, we may intentionally choose to increase the rate of our research and development expenses more rapidly than the increase in the rate of our revenue in the short term in anticipation of the long term benefits we would derive from such investment. However, such benefits may never materialize or may not be as significant as we originally believed they would be. If we experience another slowdown in the broadband communications markets in which we operate, we may not be able to scale back our operating expenses in a sufficiently timely or effective manner. In that event, our business, financial condition and results of operations would be materially and adversely affected.

Our past growth has placed, and any future growth is expected to continue to place, a significant strain on our management personnel, systems and resources. To implement our current business and product plans, we will need to continue to expand, train, manage and motivate our workforce. All of these endeavors will require substantial management effort. In the past we have implemented an enterprise resource planning, or ERP, system to help us improve our planning and management processes, and more recently we have implemented a new equity administration system to support our more complex equity programs as well as the adoption of SFAS 123R. We anticipate that we will also need to continue to implement a variety of new and upgraded operational and financial systems, including enhanced human resources management, or HRM, systems and a business-to-business solution, as well as additional procedures and other internal management systems. In general, the accuracy of information delivered by these systems may be subject to inherent programming quality. In addition, to support our growth, in March 2007 we relocated our headquarters and Irvine operations to new, larger facilities that have enabled us to centralize all of our Irvine employees and operations on one campus. We may also engage in other relocations of our employees or operations from time to time. Such relocations could result in temporary disruptions of our

operations or a diversion of management’s attention and resources. If we are unable to effectively manage our expanding operations, we may be unable to scale our business quickly enough to meet competitive challenges or exploit potential market opportunities, or conversely, we may scale our business too quickly and the rate of increase in our expenses may exceed the rate of increase in our revenue, either of which would materially and adversely affect our current or future business.

If we are unable to develop and introduce new products successfully and in a cost-effective and timely manner or to achieve market acceptance of our new products, our operating results would be adversely affected.

Our future success is dependent upon our ability to develop new semiconductor solutions for existing and new markets, introduce these products in a cost-effective and timely manner, and convince leading equipment manufacturers to select these products for design into their own new products. Our products are generally incorporated into our customers’ products at the design stage. We often incur significant expenditures on the development of a new product without any assurance that an equipment manufacturer will select our product for design into its own product. Once an equipment manufacturer designs a competitor’s product into its product offering, it becomes significantly more difficult for us to sell our products to that customer because changing suppliers involves significant cost, time, effort and risk for the customer.

Even if an equipment manufacturer designs one of our products into its product offering, we have no assurances that its product will be commercially successful or that we will receive any revenue from sales of that product. Sales of our products largely depend on the commercial success of our customers’ products. Our customers are typically not obligated to purchase our products and can choose at any time to stop using our products if their own products are not commercially successful or for any other reason.

Our historical results have been, and we expect that our future results will continue to be, dependent on the introduction of a relatively small number of new products and the timely completion and delivery of those products to customers. The development of new silicon devices is highly complex, and from time to time we have experienced delays in completing the development and introduction of new products and lower than anticipated manufacturing yields in the early production of such products. If we were to experience any similar delays in the successful completion of a new product or similar reductions in our manufacturing yields for a new product in the future, our customer relationships, reputation and business could be seriously harmed.

Our ability to develop and deliver new products successfully will depend on various factors, including our ability to:


	•	timely and accurately predict market requirements and evolving industry standards;

	•	accurately define new products;

	•	timely and effectively identify and capitalize upon opportunities in new markets;

	•	timely complete and introduce new product designs;

	•	scale our operations in response to changes in demand for our products and services or the demand for new products requested by our customers;

	•	license any desired third party technology or intellectual property rights;

	•	effectively develop and integrate technologies from companies that we have acquired;

	•	timely qualify and obtain industry interoperability certification of our products and the products of our customers into which our products will be incorporated;

	•	obtain sufficient foundry capacity and packaging materials;

	•	achieve high manufacturing yields; and

	•	shift our products to smaller geometry process technologies to achieve lower cost and higher levels of design integration.

In some of our businesses, our ability to develop and deliver next-generation products successfully and in a timely manner may depend in part on access to information, or licenses of technology or intellectual property rights, from companies that are our competitors. We cannot assure you that such information or licenses will be made available to us on a timely basis, if at all, or at reasonable cost and on commercially reasonable terms.

If we are not able to develop and introduce new products successfully and in a cost-effective and timely manner, we will be unable to attract new customers or to retain our existing customers, as these customers may transition to other companies that can meet their product development needs, which would materially and adversely affect our results of operations.

Because we depend on a few significant customers for a substantial portion of our revenue, the loss of a key customer could seriously impact our revenue and harm our business. In addition, if we are unable to continue to sell existing and new products to our key customers in significant quantities or to attract new significant customers, our future operating results could be adversely affected.

We have derived a substantial portion of our past revenue from sales to a relatively small number of customers. As a result, the loss of any significant customer could materially and adversely affect our financial condition and results of operations.

Sales to our five largest customers represented 43.5% and 45.9% of our net revenue in the six months ended June 30, 2007 and 2006, respectively. We expect that our largest customers will continue to account for a substantial portion of our net revenue in 2007 and for the foreseeable future. The identities of our largest customers and their respective contributions to our net revenue have varied and will likely continue to vary from period to period.

We may not be able to maintain or increase sales to certain of our key customers for a variety of reasons, including the following:


	•	most of our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty;

	•	our agreements with our customers typically do not require them to purchase a minimum quantity of our products;

	•	many of our customers have pre-existing or concurrent relationships with our current or potential competitors that may affect the customers’ decisions to purchase our products;

	•	our customers face intense competition from other manufacturers that do not use our products; and

	•	some of our customers offer or may offer products that compete with our products.

These relationships often require us to develop new products that may involve significant technological challenges. Our customers frequently place considerable pressure on us to meet their tight development schedules. Accordingly, we may have to devote a substantial amount of our resources to our strategic relationships, which could detract from or delay our completion of other important development projects. Delays in development could impair our relationships with strategic customers and negatively impact sales of the products under development.

In addition, our longstanding relationships with some larger customers may also deter other potential customers who compete with these customers from buying our products. To attract new customers or retain existing customers, we may offer certain customers favorable prices on our products. We may have to offer the same lower prices to certain of our customers who have contractual “most favored nation” pricing arrangements. In that event, our average selling prices and gross margins would decline. The loss of a key customer, a reduction in sales to any key customer, or our inability to attract new significant customers could seriously impact our revenue and materially and adversely affect our results of operations.

We may not be able to adequately protect or enforce our intellectual property rights, which could harm our competitive position.

Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. We primarily rely on patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods, to protect our proprietary technologies and processes. Despite our efforts to protect our proprietary technologies and processes, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies and processes. We currently hold more than 2,200 U.S. and 900 foreign patents and have filed more than 6,600 additional U.S. and foreign patent applications. However, we cannot assure you that any additional patents will be issued. Even if a new patent is issued, the claims allowed may not be sufficiently broad to protect our technology. In addition, any of our existing or future patents may be challenged, invalidated or circumvented. As such, any rights granted under these patents may not provide us with meaningful protection. We may not be able to obtain foreign patents or file pending applications corresponding to our U.S. patents and patent applications. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. If our patents do not adequately protect our technology, our competitors may be able to offer products similar to ours. Our competitors may also be able to develop similar technology independently or design around our patents. Some or all of our patents have in the past been licensed and likely will in the future be licensed to certain of our competitors through cross-license agreements. Moreover, because we have participated and continue to participate in developing various industry standards, we may be required to license some of our patents to others, including competitors, who develop products based on those standards.

Certain of our software (as well as that of our customers) may be derived from so-called “open source” software that is generally made available to the public by its authorsand/or other third parties. Such open source software is often made available under licenses, such as the GNU General Public License, or GPL, which impose certain obligations on us in the event we were to distribute derivative works of the open source software. These obligations may require us to make source code for the derivative works available to the public,and/or license such derivative works under a particular type of license, rather than the forms of license customarily used to protect our intellectual property. In addition, there is little or no legal precedent for interpreting the terms of certain of these open source licenses, including the determination of which works are subject to the terms of such licenses. While we believe we have complied with our obligations under the various applicable licenses for open source software, in the event that the copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the publicand/or stop distribution of that work. With respect to our proprietary software, we generally license such software under terms that prohibit combining it with open source software as described above. Despite these restrictions, parties may combine Broadcom proprietary software with open source software without our authorization, in which case we might nonetheless be required to release the source code of our proprietary software.

We generally enter into confidentiality agreements with our employees, consultants and strategic partners. We also try to control access to and distribution of our technologies, documentation and other proprietary information. Despite these efforts, internal or external parties may attempt to copy, disclose, obtain or use our products, services or technology without our authorization. Also, current or former employees may seek employment with our business partners, customers or competitors, and we cannot assure you that the confidential nature of our proprietary information will be maintained in the course of such future employment. Additionally, current, departing or former employees or third parties could attempt to penetrate our computer systems and networks to misappropriate our proprietary information and technology or interrupt our business. Because the techniques used by computer hackers and others to access or sabotage networks change frequently and generally are not recognized until launched against a target, we may be unable to anticipate, counter or ameliorate these techniques. As a result, our technologies and processes may be misappropriated, particularly in countries where laws may not protect our proprietary rights as fully as in the United States.

In addition, some of our customers have entered into agreements with us that grant them the right to use our proprietary technology if we fail to fulfill our obligations, including product supply obligations, under those agreements, and if we do not correct the failure within a specified time period. Also, some customers may require that we make certain intellectual property available to our competitors so that the customer has a choice among

semiconductor vendors for solutions to be incorporated into the customer’s products. Moreover, we often incorporate the intellectual property of strategic customers into our own designs, and have certain obligations not to use or disclose their intellectual property without their authorization.

We cannot assure you that our efforts to prevent the misappropriation or infringement of our intellectual property or the intellectual property of our customers will succeed. We have in the past been and currently are engaged in litigation to enforce or defend our intellectual property rights, protect our trade secrets, or determine the validity and scope of the proprietary rights of others, including our customers. It is possible that such litigation may adversely affect our relationships with certain customers who are either involved in such litigation or also have business relationships with the party with whom we are engaged in litigation. Such litigation (and the settlement thereof) has been and will likely continue to be very expensive and time consuming. Additionally, any litigation can divert the attention of management and other key employees from the operation of the business, which could negatively impact our business and results of operations.

Intellectual property risks and third party claims of infringement, misappropriation of proprietary rights or other claims against us could adversely affect our ability to market our products, require us to redesign our products or seek licenses from third parties, and seriously harm our operating results. In addition, the defense of such claims could result in significant costs and divert the attention of our management or other key employees.

Companies in and related to the semiconductor industry often aggressively protect and pursue their intellectual property rights. There are various intellectual property risks associated with developing and producing new products and entering new markets, and we may not be able to obtain, at reasonable cost and upon commercially reasonable terms, licenses to intellectual property of others that is alleged to read on such new or existing products. From time to time, we have received, and may continue to receive, notices that claim we have infringed upon, misappropriated or misused other parties’ proprietary rights. Moreover, in the past we have been and we currently are engaged in litigation with parties that claim that we infringed their patents or misappropriated or misused their trade secrets. In addition, we or our customers may be sued by other parties that claim that our products have infringed their patents or misappropriated or misused their trade secrets, or which may seek to invalidate one or more of our patents. An adverse determination in any of these types of disputes could prevent us from manufacturing or selling some of our products, limit or restrict the type of work that employees involved in such litigation may perform for Broadcom, increase our costs of revenue, and expose us to significant liability. Any of these claims may materially and adversely affect our business, financial condition and results of operations. For example, in a patent or trade secret action, a court could issue a preliminary or permanent injunction that would require us to withdraw or recall certain products from the market, redesign certain products offered for sale or under development, or restrict employees from performing work in their areas of expertise. We may also be liable for damages for past infringement and royalties for future use of the technology, and we may be liable for treble damages if infringement is found to have been willful. In addition, governmental agencies may commence investigations or criminal proceedings against our employees, former employeesand/or the company relating to claims of misappropriation or misuse of another party’s proprietary rights. We may also have to indemnify some customers and strategic partners under our agreements with such parties if a third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or misused another party’s proprietary rights. We have received requests from certain customers and strategic partners to include increasingly broad indemnification provisions in our agreements with them. These indemnification provisions may, in some circumstances, extend our liability beyond the products we provide to include liability for combinations of components or system level designs and for consequential damagesand/or lost profits. Even if claims against us are not valid or successfully asserted, these claims could result in significant costs and diversion of the attention of management and other key employees to defend. Additionally, we have sought and may in the future seek to obtain a license under a third party’s intellectual property rights and have granted and may in the future grant a license to certain of our intellectual property rights to a third party in connection with a cross-license agreement or a settlement of claims or actions asserted against us. However, we may not be able to obtain a license under a third party’s intellectual property rights on commercially reasonable terms, if at all.

Our products may contain technology provided to us by other parties such as contractors, suppliers or customers. We may have little or no ability to determine in advance whether such technology infringes the intellectual property rights of a third party. Our contractors, suppliers and licensors may not be required to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs or damages. In addition, we may have little or no ability to correct errors in the technology provided by such contractors, suppliers and licensors, or to continue to develop new generations of such technology. Accordingly, we may be dependent on their ability and willingness to do so. In the event of a problem with such technology, or in the event that our rights to use such technology become impaired, we may be unable to ship our products containing such technology, and may be unable to replace the technology with a suitable alternative within the time frame needed by our customers.

The complexity of our products could result in unforeseen delays or expenses and in undetected defects, or bugs, which could damage our reputation with current or prospective customers, result in significant costs and claims, and adversely affect the market acceptance of new products.

Highly complex products such as the products that we offer frequently contain hardware or software defects or bugs when they are first introduced or as new versions are released. Our products have previously experienced, and may in the future experience, these defects and bugs. If any of our products contains defects or bugs, or has reliability, quality or compatibility problems, our reputation may be damaged and customers may be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attract new customers. In addition, these defects or bugs could interrupt or delay sales or shipment of our products to our customers. To alleviate these problems, we may have to invest significant capital and other resources. Although our products are tested by us, our subcontractors, suppliers and customers, it is possible that our new products will contain defects or bugs. If any of these problems are not found until after we have commenced commercial production of a new product, we may be required to incur additional development costs and product recall, repair or field replacement costs. These problems may divert our technical and other resources from other development efforts and could result in claims against us by our customers or others, including possible claims for consequential damagesand/or lost profits. In addition, system and handset providers that purchase components may require that we assume liability for defects associated with products produced by their manufacturing subcontractors and require that we provide a warranty for defects or other problems which may arise at the system level. Moreover, we would likely lose, or experience a delay in, market acceptance of the affected product or products, and we could lose credibility with our current and prospective customers.

To remain competitive, we must keep pace with rapid technological change and evolving industry standards in the semiconductor industry and wired and wireless communications markets.

Our future success will depend on our ability to anticipate and adapt to changes in technology and industry standards and our customers’ changing demands. We sell products in markets that are characterized by rapid technological change, evolving industry standards, frequent new product introductions, short product life cycles and increasing demand for higher levels of integration and smaller process geometries. Our past sales and profitability have resulted, to a large extent, from our ability to anticipate changes in technology and industry standards and to develop and introduce new and enhanced products incorporating the new standards and technologies. Our ability to adapt to these changes and to anticipate future standards, and the rate of adoption and acceptance of those standards, will be a significant factor in maintaining or improving our competitive position and prospects for growth. If new industry standards emerge, our products or our customers’ products could become unmarketable or obsolete, and we could lose market share. We may also have to incur substantial unanticipated costs to comply with these new standards. In addition, our target markets continue to undergo rapid growth and consolidation. A significant slowdown in any of these wired and wireless communications markets could materially and adversely affect our business, financial condition and results of operations. These rapid technological changes and evolving industry standards make it difficult to formulate a long-term growth strategy because the semiconductor industry and wired and wireless communications markets may not continue to develop to the extent or in the time periods that we anticipate. We have invested substantial resources in emerging technologies that did not achieve the market acceptance that we had expected. If new markets do not develop as

and when we anticipate, or if our products do not gain widespread acceptance in these markets, our business, financial condition and results of operations could be materially and adversely affected.

We may experience difficulties in transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

To remain competitive, we expect to continue to transition our semiconductor products to increasingly smaller line width geometries. This transition requires us to modify the manufacturing processes for our products and to redesign some products as well as standard cells and other integrated circuit designs that we may use in multiple products. We periodically evaluate the benefits, on aproduct-by-product basis, of migrating to smaller geometry process technologies to reduce our costs. Currently most of our products are manufactured in .35 micron, .22 micron, .18 micron, .13 micron and 90 nanometer geometry processes. We are now designing most new products in 65 nanometer process technology. In the past, we have experienced some difficulties in shifting to smaller geometry process technologies or new manufacturing processes, which resulted in reduced manufacturing yields, delays in product deliveries and increased expenses. The transition to 65 nanometer geometry process technology has resulted in significantly higher mask and prototyping costs, as well as additional expenditures for engineering design tools and related computer hardware. We may face similar difficulties, delays and expenses as we continue to transition our products to smaller geometry processes. We are dependent on our relationships with our foundry subcontractors to transition to smaller geometry processes successfully. We cannot assure you that the foundries that we use will be able to effectively manage the transition in a timely manner, or at all, or that we will be able to maintain our existing foundry relationships or develop new ones. If any of our foundry subcontractors or we experience significant delays in this transition or fail to efficiently implement this transition, we could experience reduced manufacturing yields, delays in product deliveries and increased expenses, all of which could harm our relationships with our customers and our results of operations. As smaller geometry processes become more prevalent, we expect to continue to integrate greater levels of functionality, as well as customer and third party intellectual property, into our products. However, we may not be able to achieve higher levels of design integration or deliver new integrated products on a timely basis, if at all. Moreover, even if we are able to achieve higher levels of design integration, such integration may have an adverse impact on our operating results, as a result of increasing costs and expenditures as described above as well as the risk that we may reduce our revenue by integrating the functionality of multiple chips into a single chip.

We may be unable to attract, retain or motivate key senior management and technical personnel, which could seriously harm our business.

Our future success depends to a significant extent upon the continued service of our key senior management personnel, including our co-founder, Chairman of the Board and Chief Technical Officer, Henry Samueli, Ph.D., our Chief Executive Officer, Scott A. McGregor, and other senior executives. We have employment agreements with Mr. McGregor and Eric K. Brandt, our Senior Vice President and Chief Financial Officer; however the agreements do not govern the length of their service. We do not have employment agreements with any other executives, or any other key employees, although we do have limited retention arrangements in place with certain executives. The loss of the services of Dr. Samueli, Mr. McGregor or certain other key senior management or technical personnel could materially and adversely affect our business, financial condition and results of operations. For instance, if certain of these individuals were to leave our company unexpectedly, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity during the search for and while any such successor is integrated into our business and operations.

Furthermore, our future success depends on our ability to continue to attract, retain and motivate senior management and qualified technical personnel, particularly software engineers, digital circuit designers, RF and mixed-signal circuit designers and systems applications engineers. Competition for these employees is intense. If we are unable to attract, retain and motivate such personnel in sufficient numbers and on a timely basis, we will experience difficulty in implementing our current business and product plans. In that event, we may be unable to successfully meet competitive challenges or to exploit potential market opportunities, which could adversely affect our business and results of operations.

Equity awards generally comprise a significant portion of our compensation packages for all employees. During the time that our periodic filings with the SEC were not current, as a result of the recent voluntary review of our equity award practices, we were not able to issue shares of our common stock pursuant to equity awards. We cannot be certain that we will be able to continue to attract, retain and motivate employees if we are unable to issue shares of our common stock pursuant to equity awards for a sustained period or if our Class A common stock experiences another substantial price decline.

We have also modified our compensation policies by increasing cash compensation to certain employees and instituting awards of restricted stock units, while simultaneously reducing awards of stock options. This modification of our compensation policies and the applicability of the SFAS 123R requirement to expense the fair value of equity awards to employees have increased our operating expenses. We cannot be certain that the changes in our compensation policies will improve our ability to attract, retain and motivate employees. Our inability to attract and retain additional key employees and the increase in stock-based compensation expense could each have an adverse effect on our business, financial condition and results of operations.

Our acquisition strategy may result in unanticipated accounting charges or otherwise adversely affect our results of operations, and result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies or businesses, or be dilutive to existing shareholders.

A key element of our business strategy involves expansion through the acquisitions of businesses, assets, products or technologies that allow us to complement our existing product offerings, expand our market coverage, increase our engineering workforce or enhance our technological capabilities. Between January 1, 1999 and June 30, 2007, we acquired 36 companies and certain assets of one other business. We continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships, and the purchase or sale of assets, including tangible and intangible assets such as intellectual property.

Acquisitions may require significant capital infusions, typically entail many risks, and could result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies or businesses. We have in the past and may in the future experience delays in the timing and successful integration of an acquired company’s technologies and product development through volume production, unanticipated costs and expenditures, changing relationships with customers, suppliers and strategic partners, or contractual, intellectual property or employment issues. In addition, key personnel of an acquired company may decide not to work for us. The acquisition of another company or its products and technologies may also require us to enter into a geographic or business market in which we have little or no prior experience. These challenges could disrupt our ongoing business, distract our management and employees, harm our reputation and increase our expenses. These challenges are magnified as the size of the acquisition increases. Furthermore, these challenges would be even greater if we acquired a business or entered into a business combination transaction with a company that was larger and more difficult to integrate than the companies we have historically acquired.

Acquisitions may require large one-time charges and can result in increased debt or contingent liabilities, adverse tax consequences, deferred compensation charges, and the recording and later amortization of amounts related to deferred compensation and certain purchased intangible assets, any of which items could negatively impact our results of operations. In addition, we may record goodwill in connection with an acquisition and incur goodwill impairment charges in the future. Any of these charges could cause the price of our Class A common stock to decline.

Acquisitions or asset purchases made entirely or partially for cash may reduce our cash reserves. We may seek to obtain additional cash to fund an acquisition by selling equity or debt securities. Any issuance of equity or convertible debt securities may be dilutive to our existing shareholders. In addition, the equity or debt securities that we may issue could have rights, preferences or privileges senior to those of our common stock. For example, as a consequence of the prior pooling-of-interests accounting rules, the securities issued in nine of our acquisitions were shares of Class B common stock, which have voting rights superior to those of our publicly traded Class A common stock.

We cannot assure you that we will be able to consummate any pending or future acquisitions or that we will realize any anticipated benefits from these acquisitions. We may not be able to find suitable acquisition opportunities that are available at attractive valuations, if at all. Even if we do find suitable acquisition opportunities, we may not be able to consummate the acquisitions on commercially acceptable terms, and any decline in the price of our Class A common stock may make it significantly more difficult and expensive to initiate or consummate additional acquisitions.

As our international business expands, we are increasingly exposed to various legal, business, political and economic risks associated with our international operations.

We currently obtain substantially all of our manufacturing, assembly and testing services from suppliers located outside the United States. In addition, 34.0% and 32.5% of our net revenue for the three and six months ended June 30, 2007, respectively, was derived from sales to independent customers outside the United States, excluding foreign subsidiaries or manufacturing subcontractors of customers that are headquartered in the United States. We also frequently ship products to our domestic customers’ international manufacturing divisions and subcontractors. Products shipped to international destinations, primarily in Asia, represented 88.2% and 88.0% of our net revenue in the three and six months ended June 30, 2007, respectively. We also undertake design and development activities in Belgium, Canada, China, Denmark, France, Greece, India, Israel, Japan, Korea, the Netherlands, Taiwan and the United Kingdom, among other locations. In addition, we undertake various sales and marketing activities through regional offices in a number of countries. We intend to continue to expand our international business activities and to open other design and operational centers abroad. The continuing effects of the war in Iraq and terrorist attacks in the United States and abroad, the resulting heightened security, and the increasing risk of extended international military conflicts may adversely impact our international sales and could make our international operations more expensive. International operations are subject to many other inherent risks, including but not limited to:


	•	political, social and economic instability;

	•	exposure to different business practices and legal standards, particularly with respect to intellectual property;

	•	natural disasters and public health emergencies;

	•	nationalization of business and blocking of cash flows;

	•	trade and travel restrictions;

	•	the imposition of governmental controls and restrictions;

	•	burdens of complying with a variety of foreign laws;

	•	import and export license requirements and restrictions of the United States and each other country in which we operate;

	•	unexpected changes in regulatory requirements;

	•	foreign technical standards;

	•	changes in taxation and tariffs;

	•	difficulties in staffing and managing international operations;

	•	fluctuations in currency exchange rates;

	•	difficulties in collecting receivables from foreign entities or delayed revenue recognition; and

	•	potentially adverse tax consequences.

Any of the factors described above may have a material adverse effect on our ability to increase or maintain our foreign sales.

We currently operate under tax holidays and favorable tax incentives in certain foreign jurisdictions. For instance, in Singapore we operate under tax holidays that reduce our taxes in that country on certain non-

investment income. Such tax holidays and incentives often require us to meet specified employment and investment criteria in such jurisdictions. However, we cannot assure you that we will continue to meet such criteria or enjoy such tax holidays and incentives, or realize any net tax benefits from tax holidays or incentives. If any of our tax holidays or incentives are terminated, our results of operations may be materially and adversely affected.

The economic conditions in our primary overseas markets, particularly in Asia, may negatively impact the demand for our products abroad. All of our international sales to date have been denominated in U.S. dollars. Accordingly, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets or require us to assume the risk of denominating certain sales in foreign currencies. We anticipate that these factors will impact our business to a greater degree as we further expand our international business activities.

In addition, a significant portion of our cash and marketable securities are held innon-U.S. domiciled countries.

Our operating results for 2006 and prior periods have been materially and adversely impacted by the results of the voluntary review of our past equity award practices concluded in January 2007. Any related action by a governmental agency could result in civil or criminal sanctions against certain of our former officers, directors and/or employees and might result in such sanctions against us and/or certain of our current officers, directors and/or employees. Such matters, and the civil litigation relating to our past equity award practices or the January 2007 restatement of our financial statements for periods ended on or before March 31, 2006, could result in significant costs and the diversion of attention of our management and other key employees.

In connection with the equity award review, we restated our financial statements for each of the years ended December 31, 1998 through December 31, 2005, and for the three months ended March 31, 2006. Accordingly, you should not rely on financial information included in the reports onForm 10-K,Form 10-Q andForm 8-K previously filed by Broadcom, the related opinions of our independent registered public accounting firm, or earnings press releases and similar communications issued by us, for periods ended on or before March 31, 2006, all of which have been superseded in their entirety by the information contained in our amended Annual Report onForm 10-K/A for the year ended December 31, 2005 and our amended Quarterly Report onForm 10-Q/A for the three months ended March 31, 2006, each filed January 23, 2007.

In June 2006 we received an informal request for information from the staff of the Los Angeles regional office of the Securities and Exchange Commission regarding our option granting practices. In December 2006 we were informed that the SEC had issued a formal order of investigation in the matter. On July 19, 2007 we received a “Wells Notice” from the SEC in connection with this investigation. Our Chairman of the Board of Directors and Chief Technical Officer, Dr. Henry Samueli, also received a Wells Notice. The Wells Notices provide notification that the staff of the SEC intends to recommend to the Commission that it bring a civil action against the recipients for possible violations of the securities laws. Based on discussions with the SEC staff, we believe that the issues the staff intends to pursue relate to our historical option granting processes and the accounting relating to those option grants. Under the process established by the SEC, recipients have the opportunity to respond in writing to a Wells Notice before the SEC staff makes any formal recommendation to the Commission regarding what action, if any, should be brought by the SEC. We and Dr. Samueli intend to provide written submissions to the SEC in response to the Wells Notices and may seek meetings with the SEC staff. We are cooperating with the SEC investigation, but do not know when or how the investigation will be resolved or what, if any, actions the SEC may require us or Dr. Samueli to take as part of that resolution. Any resolution of this investigation could result in civil sanctionsand/or fines against Broadcomand/or certain of our current or former officers, directorsand/or employees, as well as potential director or officer bars against certain of our current or former officers, directorsand/or employees.

Broadcom has also been informally contacted by the U.S. Attorney’s Office for the Central District of California and has been asked to produce on a voluntary basis documents, many of which we previously provided to the SEC. In addition, we have produced documents pursuant to grand jury subpoenas. We are cooperating with the U.S. Attorney’s Office in its investigation. The U.S. Attorney’s Office continues to interview present and former Broadcom employees, officers and directors as part of the investigation. Any action by the U.S. Attorney’s Office or other governmental agency could result in criminal sanctions and/or fines against Broadcomand/or certain of our current or former officers, directorsand/or employees.

Additionally, as discussed in Note 7 of Notes to Unaudited Consolidated Financial Statements, included in Part I, Item I of this Report, we currently are engaged in civil litigation with parties that claim, among other allegations, that certain of our current and former directors and officers improperly dated stock option grants to enhance their own profits on the exercise of such options or for other improper purposes. Although we and the other defendants intend to defend these claims vigorously, there are many uncertainties associated with any litigation, and we cannot assure you that these actions will be resolved without substantial costsand/or settlement charges. We have entered into indemnification agreements with each of our present and former directors and officers. Under those agreements, Broadcom is required to indemnify each such director or officer against expenses, including attorneys’ fees, judgments, fines and settlements, paid by such individual in connection with the pending litigation (other than indemnified liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest).

The resolution of the pending investigations by the SEC and U.S. Attorney’s Office, the defense of our pending civil litigation, and the defense of any additional litigation that may arise relating to our past equity award practices or the January 2007 restatement of our prior financial statements could result in significant costs and diversion of the attention of management and other key employees. Although we maintain various insurance policies related to the risks associated with our business, including directors’ and officers’ insurance, we cannot assure you that the amount of our insurance coverage will be sufficient or that our insurance policies will provide coverage for all of the matters and circumstances described above. Our business, financial position and results of operations may be materially and adversely affected to the extent that our insurance coverage fails to pay or reimburse all of the expenses and any judgments, fines or settlement costs that we may incur in connection with these matters.

We had a material weakness in internal control over financial reporting prior to 2007 and cannot assure you that additional material weaknesses will not be identified in the future. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings may not be timely and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting as of the end of each year, and to include a management report assessing the effectiveness of our internal control over financial reporting in each Annual Report onForm 10-K. Section 404 also requires our independent registered public accounting firm to attest to, and report on, management’s assessment of Broadcom’s internal control over financial reporting.

In assessing the findings of the voluntary equity award review as well as the restatement of our consolidated financial statements for periods ended on or before March 31, 2006, our management concluded that there was a material weakness, as defined in Public Company Accounting Oversight Board Auditing Standard No. 2, in our internal control over financial reporting as of December 31, 2005. Management believes this material weakness was remediated September 19, 2006 and, accordingly, no longer exists as of the date of this filing.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. In addition, we may reassess the implementation or testing of certain of our current controls as a result of the recent release of Public Company Accounting Oversight Board Auditing Standard No. 5, which may lead to modifications in such controls. These modifications could affect the overall effectiveness or evaluation of the control system in the future by us or our independent registered public accounting firm. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As a result, we cannot assure you that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future. Any failure to maintain or implement required new or

improved controls, or any difficulties we encounter in their implementation, could result in significant deficiencies or material weaknesses, cause us to fail to timely meet our periodic reporting obligations, or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding disclosure controls and the effectiveness of our internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to timely meet our reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.

We face intense competition in the semiconductor industry and the wired and wireless communications markets, which could reduce our market share in existing markets and affect our entry into new markets.

The semiconductor industry and the wired and wireless communications markets are intensely competitive. We expect competition to continue to increase as industry standards become well known and as other competitors enter our target markets. We currently compete with a number of major domestic and international suppliers of integrated circuits and related applications in our target markets. We also compete with suppliers of system-level and motherboard-level solutions incorporating integrated circuits that are proprietary or sourced from manufacturers other than Broadcom. In all of our target markets we also may face competition from newly established competitors, suppliers of products based on new or emerging technologies, and customers who choose to develop their own semiconductor solutions. We expect to encounter further consolidation in the markets in which we compete.

Many of our competitors operate their own fabrication facilities and have longer operating histories and presence in key markets, greater name recognition, larger customer bases, and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than we do. These competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the promotion and sale of their products. In addition, current and potential competitors have established or may establish financial or strategic relationships among themselves or with existing or potential customers, resellers or other third parties. Accordingly, new competitors or alliances among competitors could emerge and rapidly acquire significant market share. Existing or new competitors may also develop technologies that more effectively address our markets with products that offer enhanced features and functionality, lower power requirements, greater levels of integration or lower cost. Increased competition has resulted in and is likely to continue to result in declining average selling prices, reduced gross margins and loss of market share in certain markets. We cannot assure you that we will be able to continue to compete successfully against current or new competitors. If we do not compete successfully, we may lose market share in our existing markets and our revenues may fail to increase or may decline.

We depend on five independent foundry subcontractors to manufacture substantially all of our current products, and any failure to secure and maintain sufficient foundry capacity could materially and adversely affect our business.

We do not own or operate a fabrication facility. Five third-party foundry subcontractors located in Asia manufacture substantially all of our semiconductor devices in current production. Availability of foundry capacity has at times in the past been reduced due to strong demand. In addition, a recurrence of severe acute respiratory syndrome, or SARS, the occurrence of a significant outbreak of avian influenza among humans, or another public health emergency in Asia could further affect the production capabilities of our manufacturers by resulting in quarantines or closures. If we are unable to secure sufficient capacity at our existing foundries, or in the event of a quarantine or closure at any of these foundries, our revenues, cost of revenues and results of operations would be negatively impacted.

In September 1999 two of our third-party foundries’ principal facilities were affected by a significant earthquake in Taiwan. As a consequence of this earthquake, they suffered power outages and equipment damage that impaired their wafer deliveries, which, together with strong demand, resulted in wafer shortages and higher wafer pricing industrywide. If any of our foundries experiences a shortage in capacity, suffers any damage to its facilities, experiences power outages, suffers an adverse outcome in pending or future litigation, or encounters financial difficulties or any other disruption of foundry capacity, we may encounter supply delays or disruptions, and we may need to qualify an alternative foundry. Even our current foundries need to have new manufacturing processes qualified if there is a disruption in an existing process. We typically require several months to qualify a

new foundry or process before we can begin shipping products from it. If we cannot accomplish this qualification in a timely manner, we may experience a significant interruption in supply of the affected products.

Because we rely on outside foundries with limited capacity, we face several significant risks in addition to those discussed above, including:


	•	a lack of guaranteed wafer supply and potential wafer shortages and higher wafer prices;

	•	limited control over delivery schedules, quality assurance, manufacturing yields and production costs; and

	•	the unavailability of, or potential delays in obtaining access to, key process technologies.

The manufacture of integrated circuits is a highly complex and technologically demanding process. Although we work closely with our foundries to minimize the likelihood of reduced manufacturing yields, our foundries have from time to time experienced lower than anticipated manufacturing yields. This often occurs during the production of new products or the installation andstart-up of new process technologies. Poor yields from our foundries could result in product shortages or delays in product shipments, which could seriously harm our relationships with our customers and materially and adversely affect our results of operations.

The ability of each foundry to provide us with semiconductor devices is limited by its available capacity and existing obligations. Although we have entered into contractual commitments to supply specified levels of products to some of our customers, we do not have a long-term volume purchase agreement or a significant guaranteed level of production capacity with any of our foundries. Foundry capacity may not be available when we need it or at reasonable prices. Availability of foundry capacity has in the past been reduced from time to time due to strong demand. Foundries can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice. It is possible that foundry customers that are larger and better financed than we are, or that have long-term agreements with our main foundries, may induce our foundries to reallocate capacity to them. This reallocation could impair our ability to secure the supply of components that we need. Although we use five independent foundries to manufacture substantially all of our semiconductor products, each component is typically manufactured at only one or two foundries at any given time, and if any of our foundries is unable to provide us with components as needed, we could experience significant delays in securing sufficient supplies of those components. Also, our third party foundries typically migrate capacity to newer, state-of-the-art manufacturing processes on a regular basis, which may create capacity shortages for our products designed to be manufactured on an older process. We cannot assure you that any of our existing or new foundries will be able to produce integrated circuits with acceptable manufacturing yields, or that our foundries will be able to deliver enough semiconductor devices to us on a timely basis, or at reasonable prices. These and other related factors could impair our ability to meet our customers’ needs and have a material and adverse effect on our operating results.

Although we may utilize new foundries for other products in the future, in using any new foundries we will be subject to all of the risks described in the foregoing paragraphs with respect to our current foundries.

We depend on third-party subcontractors to assemble, obtain packaging materials for, and test substantially all of our current products. If we lose the services of any of our subcontractors or if these subcontractors are unable to obtain sufficient packaging materials, shipments of our products may be disrupted, which could harm our customer relationships and adversely affect our net sales.

We do not own or operate an assembly or test facility. Eight third-party subcontractors located in Asia assemble, obtain packaging materials for, and test substantially all of our current products. Because we rely on third-party subcontractors to perform these functions, we cannot directly control our product delivery schedules and quality assurance. This lack of control has resulted, and could in the future result, in product shortages or quality assurance problems that could delay shipments of our products or increase our manufacturing, assembly or testing costs.

In the past we and others in our industry experienced a shortage in the supply of packaging substrates that we use for our products. If our third-party subcontractors are unable to obtain sufficient packaging materials for our products in a timely manner, we may experience a significant product shortage or delay in product shipments, which could seriously harm our customer relationships and materially and adversely affect our net sales.

We do not have long-term agreements with any of our assembly or test subcontractors and typically procure services from these suppliers on a per order basis. If any of these subcontractors experiences capacity constraints or financial difficulties, suffers any damage to its facilities, experiences power outages or any other disruption of assembly or testing capacity, or is unable to obtain sufficient packaging materials for our products, we may not be able to obtain alternative assembly and testing services in a timely manner. Due to the amount of time that it usually takes us to qualify assemblers and testers, we could experience significant delays in product shipments if we are required to find alternative assemblers or testers for our components. Any problems that we may encounter with the delivery, quality or cost of our products could damage our customer relationships and materially and adversely affect our results of operations. We are continuing to develop relationships with additional third-party subcontractors to assemble and test our products. However, even if we use these new subcontractors, we will continue to be subject to all of the risks described above.

Our stock price is highly volatile. Accordingly, you may not be able to resell your shares of common stock at or above the price you paid for them.

The market price of our Class A common stock has fluctuated substantially in the past and is likely to continue to be highly volatile and subject to wide fluctuations. Since January 1, 2002 our Class A common stock has traded at prices as low as $6.35 and as high as $50.00 per share. Fluctuations have occurred and may continue to occur in response to various factors, many of which we cannot control, including:


	•	quarter-to-quarter variations in our operating results;

	•	changes in accounting rules, particularly those related to the expensing of stock options;

	•	rulings in currently pending or newly-instituted intellectual property litigation;

	•	other newly-instituted litigation or governmental investigations or an adverse decision or outcome in any litigation or investigations;

	•	announcements of changes in our senior management;

	•	the gain or loss of one or more significant customers or suppliers;

	•	announcements of technological innovations or new products by our competitors, customers or us;

	•	the gain or loss of market share in any of our markets;

	•	general economic and political conditions and specific conditions in the semiconductor industry and the wired and wireless communications markets, including seasonality in sales of consumer products into which our products are incorporated;

	•	continuing international conflicts and acts of terrorism;

	•	changes in earnings estimates or investment recommendations by analysts;

	•	changes in investor perceptions; or

	•	changes in expectations relating to our products, plans and strategic position or those of our competitors or customers.

In addition, the market prices of securities of Internet-related, semiconductor and other technology companies have been and remain volatile. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to the operating performance of the specific companies. Accordingly, you may not be able to resell your shares of common stock at or above the price you paid. In the past, we and other companies that have experienced volatility in the market price of their securities have been, and in the future we may be, the subject of securities class action litigation.

Our co-founders, directors, executive officers and their affiliates can control the outcome of matters that require the approval of our shareholders, and accordingly we will not be able to engage in certain transactions without their approval.

As of June 30, 2007 our co-founders, directors, executive officers and their respective affiliates beneficially owned 13.8% of our outstanding common stock and held 59.3% of the total voting power held by our shareholders. Accordingly, these shareholders currently have enough voting power to control the outcome of matters that require the approval of our shareholders. These matters include the election of our Board of Directors, the issuance of additional shares of Class B common stock, and the approval of most significant corporate transactions, including certain mergers and consolidations and the sale of substantially all of our assets. In particular, as of June 30, 2007 our two founders, Dr. Henry T. Nicholas III, who is no longer an officer or director of Broadcom, and Dr. Henry Samueli, our Chairman of the Board and Chief Technical Officer, beneficially owned a total of 13.0% of our outstanding common stock and held 58.7% of the total voting power held by our shareholders. Because of their significant voting stock ownership, we will not be able to engage in certain transactions, and our shareholders will not be able to effect certain actions or transactions, without the approval of one or both of these shareholders. These actions and transactions include changes in the composition of our Board of Directors, certain mergers, and the sale of control of our company by means of a tender offer, open market purchases or other purchases of our Class A common stock, or otherwise. Repurchases of shares of our Class A common stock under our share repurchase program will result in an increase in the total voting power of our co-founders, directors, executive officers and their affiliates, as well as other continuing shareholders.

One of the independent foundries upon which we rely to manufacture substantially all of our current products, as well as our own California and Singapore facilities, are located in regions that are subject to earthquakes and other natural disasters.

One of the five third-party foundries upon which we rely to manufacture substantially all of our semiconductor devices is located in Taiwan. Taiwan has experienced significant earthquakes in the past and could be subject to additional earthquakes. Any earthquake or other natural disaster, such as a tsunami, in a country in which any of our foundries is located could significantly disrupt our foundries’ production capabilities and could result in our experiencing a significant delay in delivery, or substantial shortage, of wafers and possibly in higher wafer prices.

Our California facilities, including our principal executive offices and major design centers, are located near major earthquake fault lines. Our international distribution center is located in Singapore, which could also be subject to an earthquake, tsunami or other natural disaster. If there is a major earthquake or any other natural disaster in a region where one or more of our facilities are located, our operations could be significantly disrupted. Although we have established business interruption plans to prepare for any such event, we cannot guarantee that we will be able to effectively address all interruptions that such an event could cause.

Any supply disruption or business interruption could materially and adversely affect our business, financial condition and results of operations.

Changes in current or future laws or regulations or accounting rules or the imposition of new laws or regulations by federal or state agencies or foreign governments could impede the sale of our products or otherwise harm our business.

Changes in current laws or regulations or accounting rules (including the possible adoption at some undetermined future date of International Financial Reporting Standards in lieu of U.S. GAAP) applicable to us or the imposition of new laws and regulations in the United States or elsewhere could materially and adversely affect our business, financial condition and results of operations.

The effects of regulation on our customers or the industries in which they operate may materially and adversely impact our business. For example, the Federal Communications Commission has broad jurisdiction over each of our target markets in the United States. Although current FCC regulations and the laws and regulations of other federal or state agencies are not directly applicable to our products, they do apply to much of the equipment into which our products are incorporated. FCC regulatory policies that affect the ability of cable or satellite operators or telephone companies to offer certain services to their customers or other aspects of their business may

impede sales of our products in the United States. For example, in the past we have experienced delays when products incorporating our chips failed to comply with FCC emissions specifications.

In addition, we and our customers are subject to various import and export regulations of the United States government. Changes in or violations of such regulations could materially and adversely affect our business, financial condition and results of operations. Additionally, various government export regulations apply to the encryption or other features contained in some of our products. We have made numerous filings and applied for and received a number of export licenses under these regulations. However, if we fail to continue to receive licenses or otherwise comply with these regulations, we may be unable to manufacture the affected products at our foreign foundries or to ship these products to certain customers located outside of the United States.

We and our customers may also be subject to regulation by countries other than the United States. Foreign governments may impose tariffs, duties and other import restrictions on components that we obtain from non-domestic suppliers and may impose export restrictions on products that we sell internationally. These tariffs, duties or restrictions could materially and adversely affect our business, financial condition and results of operations.

Due to environmental concerns, the use of lead and other hazardous substances in electronic components and systems is receiving increased attention. In response, the European Union passed the Restriction on Hazardous Substances, or RoHS, Directive, legislation that limits the use of lead and other hazardous substances in electrical equipment. The RoHS Directive became effective July 1, 2006. We believe that our current product designs and material supply chains are in compliance with the RoHS Directive. However, it is possible that unanticipated supply shortages or delays may occur as a result of these recent regulations.

Our articles of incorporation and bylaws contain anti-takeover provisions that could prevent or discourage a third party from acquiring us.

Our articles of incorporation and bylaws contain provisions that may prevent or discourage a third party from acquiring us, even if the acquisition would be beneficial to our shareholders. In addition, we have in the past issued and may in the future issue shares of Class B common stock in connection with certain acquisitions, upon exercise of certain stock options, and for other purposes. Class B shares have superior voting rights entitling the holder to ten votes for each share held on matters that we submit to a shareholder vote (as compared to one vote per share in the case of our Class A common stock) as well as the right to vote separately as a class (i) as required by law and (ii) in the case of a proposed issuance of additional shares of Class B common stock, unless such issuance is approved by at least two-thirds of the members of the Board of Directors then in office. Our Board of Directors also has the authority to fix the rights and preferences of shares of our preferred stock and to issue shares of common or preferred stock without a shareholder vote. It is possible that the provisions in our charter documents, the exercise of supervoting rights by holders of our Class B common stock, our co-founders’, directors’ and officers’ ownership of a majority of the Class B common stock, or the ability of our Board of Directors to issue preferred stock or additional shares of Class B common stock may prevent or discourage third parties from acquiring us, even if the acquisition would be beneficial to our shareholders. In addition, these factors may discourage third parties from bidding for our Class A common stock at a premium over the market price for our stock. These factors may also materially and adversely affect voting and other rights of the holders of our common stock and the market price of our Class A common stock.


Item 2.	*Unregistered Sales of Equity Securities and Use of Proceeds*

In the three months ended June 30, 2007, we issued an aggregate of 2.0 million shares of our Class A common stock upon conversion of a like number of shares of our Class B common stock. Each share of our Class B common stock is convertible at the option of the holder into one share of Class A common stock, and in most instances will automatically convert into one share of Class A common stock upon sale or other transfer. The offer and sale of the securities were effected without registration in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.

Issuer Purchases of Equity Securities

$1.0 billion, depending on market conditions and other factors. Repurchases under the program may be made at any time and from time to time during the 18 month period that commenced February 12, 2007. The following table presents details of our repurchases during the three months ended June 30, 2007:

Approximate Dollar

Total Number of

Value of Shares

Total Number

Average

Shares Purchased

That May yet be

of Shares

Price

as Part of Publicly

Purchased under

Period

Purchased

per Share

Announced Plan

the Plan

(In thousands)

April 1, 2007 — April 30, 2007

1,087

32.72

1,087

May 1, 2007 — May 31, 2007

2,184

31.73

2,184

June 1, 2007 — June 30, 2007

2,800

30.42

2,800

Total

6,071

31.30

6,071

345,524

From the time the new program was implemented through June 30, 2007, we repurchased a total of 19.8 million shares at a weighted average price of $33.03 per share, of which $641.3 million was settled in cash during the six months ended June 30, 2007 and the remaining $13.2 million was included in accrued liabilities. At June 30, 2007, $345.5 million remained available to repurchase shares under the authorized program.


Item 3.	*Defaults upon Senior Securities*

None.


Item 4.	*Submission of Matters to a Vote of Security Holders*

(a) Our 2007 Annual Meeting of Shareholders (the “2007 Annual Meeting”) was held May 2, 2007.

(b) At the 2007 Annual Meeting, the shareholders elected each of the following nominees as directors, to serve on our Board of Directors until the next annual meeting of shareholdersand/or until their successors are duly elected and qualified. The vote for each director was as follows:


	Class A
	Shares/		Class B		Class B
	Votes		Shares		Votes		Total Votes

George L. Farinsky		397,608,515		72,117,962		721,179,620		1,118,788,135
Maureen E. Grzelakowski		274,452,600		72,471,682		724,716,820		999,169,420
Nancy H. Handel		417,691,810		72,117,962		721,179,620		1,138,871,430
John Major		265,553,527		72,117,910		721,179,100		986,732,627
Scott A. McGregor		412,472,882		72,471,734		724,717,340		1,137,190,222
Alan E. Ross		273,276,360		72,471,682		724,716,820		997,993,180
Henry Samueli, Ph.D.		281,917,501		72,471,682		724,716,820		1,006,634,321
Robert E. Switz		386,604,357		72,117,962		721,179,620		1,107,783,977
Werner F. Wolfen		251,070,137		72,471,682		724,716,820		975,786,957

(c) At the 2007 Annual Meeting, the Shareholders also voted on the following four proposals and cast their votes as follows:

(1) To approve the amendment and restatement to Broadcom’s 1998 Employee Stock Purchase Plan to (i) extend the term of the 1998 ESPP by approximately nine years, through April 30, 2017, (ii) increase the limitation on the amount by which the share reserve is to automatically increase each year to not more than 10,000,000 shares of Class A common stock, and (iii) create a common share pool to fund stock purchases under

both the 1998 ESPP and the new 2007 International Employee Stock Purchase Plan, referred to as the IESPP, that became effective on February 1, 2007.


	Class A
	Shares/		Class B		Class B
	Votes		Shares		Votes		Total Votes

For		136,686,157		72,450,561		724,505,610		861,191,767
Against		219,325,952		2,106		21,060		219,347,012
Abstain		2,518,622		13,664		136,640		2,655,262
Broker Non-Votes		73,427,004		9,565		95,650		73,522,654

(2) To approve the executive officer performance bonus plan to allow bonuses paid under the plan to qualify as performance-based compensation, which is not subject to the $1 million per person limitation imposed under Section 162(m) of the Internal Revenue Code, referred to as Section 162(m), on the income tax deductibility of compensation paid to certain executive officers.


	Class A
	Shares/		Class B		Class B
	Votes		Shares		Votes		Total Votes

For		341,692,332		72,426,325		724,263,250		1,065,955,582
Against		7,791,818		26,342		263,420		8,055,238
Abstain		9,046,910		13,664		136,640		9,183,550
Broker Non-Votes		73,426,675		9,565		95,650		73,522,325

(3) To approve an amendment and restatement of Broadcom’s 1998 Stock Incentive Plan, as previously amended and restated, that will (i) extend the term of the 1998 Incentive Plan through March 9, 2017, (ii) eliminate our ability to reduce the exercise price of outstanding options, except in connection with certain changes to our capital structure, as explained below, (iii) eliminate our ability to grant options with exercise prices less than 100% of the fair market value of our Class A common stock on the date of grant, (iv) increase the limitation on the amount by which the share reserve is to automatically increase each year to not more than 45,000,000 shares of Class A common stock, and (v) effect various technical revisions to facilitate plan administration.


	Class A
	Shares/		Class B		Class B
	Votes		Shares		Votes		Total Votes

For		89,059,218		72,448,311		724,483,110		813,542,328
Against		260,326,549		4,356		43,560		260,370,109
Abstain		9,144,963		13,664		136,640		9,281,603
Broker Non-Votes		73,427,005		9,565		95,650		73,522,655

(4) To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2007.


	Class A
	Shares/		Class B		Class B
	Votes		Shares		Votes		Total Votes

For		397,128,074		72,120,212		721,202,120		1,118,330,194
Against		30,972,742		1,912		19,120		30,991,862
Abstain		3,856,589		353,772		3,537,720		7,394,309
Broker Non-Votes		N/A		N/A		N/A		N/A

(5) To consider a shareholder proposal to (i) use the average of the opening and closing prices of our stock to determine the exercise price for an option granted to a senior executive and (ii) establish and disclose in advance the date on which prospective option grants are to be made to our senior executives.


	Class A
	Shares/		Class B		Class B
	Votes		Shares		Votes		Total Votes

For		160,835,367		350,607		3,506,070		164,341,437
Against		147,112,034		72,080,022		720,800,220		867,912,254
Abstain		50,583,300		35,702		357,020		50,940,320
Broker Non-Votes		73,427,034		9,565		95,650		73,522,684


Item 5.	*Other Information*

In May 2007 our Board of Directors reconstituted its committees. The current members of each committee and the respective committee chairs are identified in the following table:

Nominating &

C = Chair

Compen-

Equity

Corporate

M = Member

Audit

sation

Award

Governance

Independent Directors

George L. Farinsky

Maureen E. Grzelakowski

Nancy H. Handel

John Major

Robert E. Switz

��

Werner F. Wolfen(1)

Employee Directors

Scott A. McGregor

Henry Samueli, Ph.D.


(1)		Mr. Wolfen also continues to serve as Lead Independent Director.

The Board has determined that each member of the Audit Committee (i) qualifies as an “audit committee financial expert” under applicable SEC rules and regulations governing composition of the Audit Committee and (ii) satisfies the “financial sophistication” requirements of the Nasdaq listing standards.


Item 6.	*Exhibits*

(a) Exhibits.The following Exhibits are attached hereto and incorporated herein by reference:


Exhibit				Where Located
Number			Description	Form	File No.	Exhibit No.			Filing Date	Filed Herewith

	10	.1	Broadcom Corporation 1998 Stock Incentive Plan (as amended and restated through March 9, 2007)	S-8	333-142526		99	.1	05/1/2007
	10	.2	Broadcom Corporation 1998 Employee Stock Purchase Plan (as amended and restated through March 9, 2007)	S-8	333-142526		99	.2	05/1/2007
	10	.3	Broadcom Corporation 2007 International Employee Stock Purchase Plan (as amended through January 19, 2007)	S-8	333-142526		99	.3	05/1/2007
	10	.4	Broadcom Corporation Executive Officer Performance Bonus Plan	8-K	000-23993		10	.1	05/8/2007

Exhibit

Where Located

Number

Description

Form

File No.

Exhibit No.

Filing Date

Filed Herewith

Certifications of the Chief Executive Officer and Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of the Chief Executive Officer and Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and furnished herewith pursuant to SEC ReleaseNo. 33-8238

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BROADCOM CORPORATION,

a California corporation

(Registrant)

/s/ Eric K. Brandt

Eric K. Brandt

Senior Vice President and

Chief Financial Officer

(Principal Financial Officer)

July 20, 2007

EXHIBIT INDEX


Exhibit				Where Located
Number			Description	Form	File No.	Exhibit No.			Filing Date	Filed Herewith

	10	.1	Broadcom Corporation 1998 Stock Incentive Plan (as amended and restated through March 9, 2007)	S-8	333-142526		99	.1	05/1/2007
	10	.2	Broadcom Corporation 1998 Employee Stock Purchase Plan (as amended and restated through March 9, 2007)	S-8	333-142526		99	.2	05/1/2007
	10	.3	Broadcom Corporation 2007 International Employee Stock Purchase Plan (as amended through January 19, 2007)	S-8	333-142526		99	.3	05/1/2007
	10	.4	Broadcom Corporation Executive Officer Performance Bonus Plan	8-K	000-23993		10	.1	05/8/2007
	31		Certifications of the Chief Executive Officer and Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002							X
	32		Certifications of the Chief Executive Officer and Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and furnished herewith pursuant to SEC ReleaseNo. 33-8238							X

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Broadcom 10-Q2007 Q3 Quarterly report

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