Broadcom Corporation (BRCM) recently announced that it has agreed to settle the securities class action litigation pending against the company and certain of its current and former officers and directors. The class action was primarily related to the company’s historical stock option accounting practices.
The lawsuit was filed by investors who bought or acquired the company’s shares between July 2005 and July 2006. Under the proposed settlement, Broadcom will need to pay $160.5 million in cash. The company expects to record the settlement amount as a one-time charge in its statement of operations for the fourth quarter of 2009.
Management expects to continue incurring legal expenses on the remaining stock option backdating issues until those matters are fully resolved. Backdating refers to the practice of altering the dates of option grants retroactively to a low vale of the stock and is generally used by employees of a company to make additional money from stock options when exercised.
However, management stated that there was no wrongdoing on company’s part in connection with the claims made against the company.
Meanwhile, earlier this month, the company raised its guidance for the fourth quarter of fiscal 2009. The company now expects revenues to increase 5% on a sequential basis to $1.32 billion, up from the prior guidance of $1.25 billion.
Management now states that the increase in guidance reflects stronger than expected demand for products in Broadband and Enterprise Networking markets, much ahead of company’s expectations. California-based Broadcom is a leading chipmaker of products used in wired and wireless communications.
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