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Broadcom Stokes Up with Digital Furnace Buy

Broadcom Corp. last week dealt for Atlanta-based Digital
Furnace, adding its patent-pending software solution that significantly increases the
capacity of existing broadband networks for interactive services without the need for
costly upgrades.

The acquisition would allow cable operators that use
Propane -- Digital Furnace's core technology that runs on Broadcom's DOCSIS 1.1
chip -- to triple the upstream capacity of broadband cable networks.

Propane uses sophisticated algorithms to improve efficiency
and reduce latency in broadband networks, providing as much as three times greater
upstream capacity for interactive services.

"The Digital Furnace software will turbo-charge
Broadcom's cable-modem technology, optimizing the full capabilities of our
chipsets," said Broadcom CEO Henry T. Nicholas III in a statement. "We can offer
our cable-modem customers superior and wider performance capabilities, allowing them to
differentiate themselves in the expanding residential and business markets."

Added Tim Lindenfelser, vice president and general manager
of Broadcom's business unit: "Eventually we will sell chipsets like the 3300 and
3350 device and offer software that will run on that chip, Propane, that gives the
customer better performance."

Propane "allows an MSO to increase their number of
customers by a factor of three before they have to upgrade their plant, or give their
customers higher performance," said John Laffington, Digital Furnace's CEO and

Broadband cable operators are moving aggressively to
introduce services to the fast-growing Internet access and telephony markets. According to
Forrester Research Inc., 26 million households will have Internet access via cable modem
by 2005, and 20 percent of U.S. households will have telephone service via cable-based
networks. These interactive services require cable operators to maximize the efficiency of
their reverse-path capacity.

Propane will be housed primarily in the cable modem and
serve as the management software for that device. But there will be a piece inside the
cable-modem termination system that will interoperate with a Propane-enabled cable modem.
The subscriber with Propane will see superior performance, said Lindenfelser.

"Anywhere where you offer packet-based communications
to a subscriber and have an asymmetric upstream where the bandwidth in that is strained,
this technique improves the upstream capability for broadband connections," he said.

The focus of Propane is on systems that combine voice and
data over the same DOCSIS network, said Laffington.

Propane would allow MSOs to delay upgrades for a
significant amount of time, and to service up to three times as many customers for the
same level of node size, he said. The software will also provide subscribers with faster,
more efficient connections.

Telephone calls are expected to remain within a cable
operator's latency threshold and Web access is expected to be faster.

Customers that already have DOCSIS 1.0 cable modems with
Broadcom's recent chipset can upgrade to the DOCSIS 1.1 spec via a simple software
download and enjoy the benefits of Propane, said Lindenfelser.

"The big number is delay, or latency," said
Laffington. "The bigger the latency, the worse performance you get. So each MSO makes
a decision as to how much delay he will tolerate in his network

"If you try to do voice over your network you have to
have your delay below 50 milliseconds or voice doesn't work," he added.
"With DOCSIS 1.1 you can see that after 20 active customers, the delay potential
increases with just two or three additional customers accessing the network.

"With Propane with DOCSIS 1.1, the delay allows for
many more customers for the same level of delay specifications. Therefore, an MSO
doesn't have to upgrade his plant while he gains those additional customers on the

Lidenfelser said he expects to get Propane into every
headend and modem within the next 10 years.

"We anticipate Propane will be out there en
masse," Lidenfelser added. "The real question is whether MSOs will embrace
DOCSIS 1.1, and the answer is yes. All of the MSOs are behind the CableLabs

The acquisition came about after Digital Furnace approached
Broadcom to see if the company would endorse Propane. Digital Furnace was already using
Broadcom chips.

"It became clear that we would do a better service to
the cable industry by merging with Broadcom rather than selling it for Digital Furnace
gain only," said Laffington.

Under the agreement, expected to be completed soon,
Broadcom will issue an aggregate of approximately 664,735 shares of its Class B Common
Stock, worth $136 million the day the deal was announced.

It will also reserve approximately 85,265 additional shares
of its class-B common stock for issuance upon exercise of outstanding employee stock
options and other rights of Digital Furnace.