September 15, 2009

Failing to buy Emulex, Broadcom sues

Broadcom filed a patent infringement suit against networking company Emulex on Monday, just months after abandoning a nearly year-long effort to buy the company.

Broadcom on Monday filed suit in the U.S. District Court for the Central District of California alleging Emulex infringed 10 patents covering a broad range of high speed data and storage networking technologies.

Emulex responded in a statement saying it is reviewing the patents named in the Broadcom complaint and that it will "vigorously" defend itself.

The patent infringement suit comes just a few months after Broadcom gave up an attempted hostile takeover of Emulex. The companies both develop chips and other networking products.

Broadcom's final offer for Emulex, worth US$925 million at the time, expired in mid-July, after months of trying to convince Emulex management and stockholders to accept its buyout offer.

When Broadcom first made public its attempt to buy Emulex, it revealed that management at the smaller chip designer had broken off discussions in January, forcing Broadcom to make their offer directly to stockholders.

"We would much prefer to have engaged in mutual and constructive discussions with you. However this opportunity is in our view so compelling we now feel we must share our proposal publicly with your shareholders," a public letter to Emulex's board on April 21 signed by Broadcom CEO Stock McGregor said.

The April 21 letter offered Emulex shareholders $9.25 per share for the company, or $764 million at the time. The Broadcom letter noted its "great deal of respect for the technical achievements of the Emulex team" and spoke highly of Emulex's "impressive expertise and leadership in Fibre Channel storage networking."

Broadcom's final offer for Emulex was $11.00 per share. The company's stock closed at $10.53 on the New York Stock Exchange on Monday.

There is no mention of any possible patent conflict in the letter, nor in seven ensuing public statements Broadcom made regarding its offer to Emulex shareholders.

Broadcom dropped the bid on July 9.

On Monday, just over three months since ending the offer, Broadcom has taken a different attitude. "We believe Emulex is infringing a broad range of Broadcom patents; we are concerned that Emulex's infringement is pervasive," the company said a statement. Broadcom is seeking monetary damages and the cessation of further infringement.

Broadcom could not immediately be reached for comment.

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