A Billionaire’s Story
Net Worth: $4.4 Billion
Wealth Origin: Broadcom
Place of Birth: Buffalo, New York
Education: Bachelor’s of Arts/Science, University of California, Los Angeles; Doctorate, University of California, Los Angeles; Master of Science, University of California, Los Angeles
It is June of 2008 and Henry Samueli’s life has been flipped-turned upside down after pleading guilty to lying to the SEC in regards to backdating $2.2 billion worth of stock options. His plea agreement included five years probation, a fine of $250,000 (the legal maximum), and a $12 million penalty.
In the heat of the moment, one journalist at Bleacher Report writes, “As a person who has reveled in Samueli’s contributions…I don’t know what to think…Samueli has given quite a bit to society, but it doesn’t mean he is above the law. If this man is allowed to roam the streets, I will have lost all faith in society.”
Being owner of the Anaheim Duck’s, who were fresh off a Stanley Cup win, the NHL suspended Samueli with the league commissioner, Gary Bettman, stating, “While Samueli has been an exemplary owner, we hold NHL personnel to the highest standards, and this plea requires the imposition of discipline under league rules.”
On September 8th, 2008, U.S. District Judge Cormac Carney rejected the plea agreement terms previously mentioned, stating they would “erode the public’s perception of our justice system to accept a plea agreement containing an unprecedented payment of $12 million to resolve the criminal liability of one of four co-conspirators in an alleged $2.2 billion securities fraud.”
While he could rescind his guilty plea – amidst the now-rejected agreement – he chose to stick with it, risking years in prison.
A Silly Mistake
As the court cases against he and his contemporaries pressed on, Samueli was brought to the stand to testify on behalf of his CFO, William Ruehle.
In regards to the statement Samueli made – for which he plead guilty to lying – Ruehle’s attorney asks him, “Do you recall whether that statement involved whether or not you were involved in granting options to officers of the company, which was the job of the compensation committee, and that you indicated that you were not so involved?”
Samueli responds, “I recall the question was about my involvement in the granting process of options to Section 16 officers, who are the highest executives of the company, and…that is the purview of the compensation committee. And I replied that I wasn’t involved in the granting process, which was not truthful because, in fact, I was involved in making recommendations to the compensation committee.”
“But ironically, the thing that bothers me most about that is that there is nothing wrong with being involved in the process of making grants to section 16 officers. I’m perfectly allowed to make recommendations. So, why I would say I wasn’t involved escapes me.”
“I thought long and hard about it because that’s not my style. I would never do something intentionally wrong under normal conditions. So my gut feeling is because I was asked about a compensation committee issue, my instant reaction was to say ‘No, I wasn’t involved,’ because I wasn’t on the compensation committee.”
“But I apparently didn’t think through that question carefully because the question wasn’t whether I was on the compensation committee…It just asked about my involvement in the process of grants to Section 16 officers. I made that false statement and I accept it, but I bang myself in the head for making such a stupid statement.”
What’s so frustrating to Samueli is that he is not in trouble for having done what he said he didn’t do. He is in court for saying that he didn’t do what he had done – and what he had done was perfectly legal. He is caught in the worst-case scenario of misunderstandings.
An Exonerated Man
At the end of the day, Carney called Samueli before the bench. “I’ll just get to the point of it,” the judge said. “Dr. Samueli, I’m going to set aside your guilty plea. I’m going to dismiss the criminal case against you, I’ve looked at the plea agreement. I’ve listened to your testimony, and you didn’t make a false material statement.”
On January 12th, 2010, Carney signed an order formally dismissing the charge against Samueli, ruling in part that the prosecutor, Adam Stolper, “acted flagrantly, willfully, and in bad faith” in the prosecution of Samueli and that Samueli had not committed a crime.
Lawrence Rosenthal, a former federal prosecutor who is a professor at Chapman University School of Law tells the Orange County Register, “I have never, ever heard of this from any judge anywhere in the country…It is stunning.”
What is “stunning” was the judge’s decision to scrap Samueli’s guilty plea in the middle of another defendant’s trial. Carney’s belief in Henry Samueli’s innocense was so unwavering.
Which is He?
Is Henry Samueli a calculated billionaire-villain who got caught up in his own thick web of white-collar crime or the victim of an overly-aggressive prosecutor’s investigation?
The answer is as simple as the man himself, he’s just an electrical engineer who used his passion to make the world a better place.
He loves teaching too. Even after making billions, Samueli is still listed on the UCLA faculty roster and apparently ready to give lectures at a moments notice.
This all began in a middle-class home in Southern California, where on some days he’d be roped into helping stock shelves at his parent’s modest liquor store. Sala and Aron Samueli would not raise a slacker, these Jewish Immigrants had survived Hitler’s unrelenting Blitzkreig, the Nazi Occupation of Poland, and all the horrors of the Holocaust…only to arrive in Buffalo, New York empty-handed.
They’d build solely upon their sheer will and the opportunity America is known to offer those who will take it. Come September 20th, 1954 they welcomed newborn, Henry Samueli, to the world. Eventually, work provided the family uproot once again to Los Angeles, where Henry, while attending Bancroft Junior High School, would experience a life-altering event.
A Pivitol Moment
In his own words, during an interview with the UCLA Engineering community, he tells the story:
“In junior high school, I took in seventh grade, an electric shop class. We were supposed to be building a crystal radio and it was too simple for me; I didn’t really want to do it. I asked the teacher if I could build a heath-kit radio I had seen in a catalog…it was an AM/FM shortwave radio…it looked really interesting and sophisticated so I asked if I could build that as a course project. Originally, he said no.”
The teacher explained, “I wouldn’t even give that to my high school seniors, let alone a seventh-grader.” Samueli continues, “I kept going back and back saying please, I promise I’ll do it. I’ll do it well, work hard at it. So he let me do it.”
“I bought this kit, every night at home I’d sit on the carpet with a soldering iron following the directions and so forth. Worked the entire semester, plugged it in at the end of the semester during class, and sound came out!”
“That hit me right there – it was like the moon landing for you. The fact that this thing…that a pile of parts that I knew nothing about…that I could put together and sound comes out magically from this thing is what hooked me and from that point on I knew I was going to become an electrical engineer.”
“I made it my mission in life to figure out how that thing worked. It all started from a seventh-grade project I had.”
After Bancroft, Henry would attend Fairfax High School and put himself on course to enroll in UCLA’s engineering program. His families financial circumstances ensured to him from the beginning that he would not be able to afford a private school education and he adds that, “Going away to school was certainly out of the question” as well.
He has no gripe about being forced to commute from home; his tone is actually thankful when reflecting on the fact his parents would also pay his $200/quarter tuition. Yes, tuition was $200 a quarter at UCLA when he began his undergraduate in 1971.
School Fulfill’s Passion
Samueli would go on to earn Bachelor’s (1975), master’s (1976), and Ph.D. (1980) degrees from UCLA. He was an exceptional student, never allowing his GPA to dip below 3.8. It’s important to note that Samueli was not simply a student chasing a degree, rather, the university provided the opportunity for him to continue his life’s purpose and passion for electrical engineering.
He knew what he wanted to do with his life before going to college, then chose an education that would allow him to further his interests. Many students have it backward today. They go to college not knowing what they want to learn, make an insecure decision on their major (probably based on other people’s opinions), then enter the workforce doing a job they are still not sure about. Que the mid-life crisis twenty years later.
All jokes aside, a HUGE point to this billionaire’s story is that he constantly follows his heart. Remember, this is before engineering was considered a lucrative career; this guy genuinely loved the projects he was working on in those classrooms.
Daily Student Life
When asked by a UCLA Engineering moderator if he did anything for “fun” while on campus, Samueli responds “Uhm…I loved to play basketball so I would always go to the men’s gym back then; they didn’t have the [Rec Center] they do now. So it was the men’s gym at Pauly Pavilion when it was open for basketball. I played basketball a lot. I tried to stay in shape.”
He adds, “Other than that, not a lot. There weren’t a lot of clubs like there are now; it’s amazing how many different organizations there are. There was the IEEE and I was a member of the IEEE. Tau Beta Pi I was a member of. There weren’t a lot of outside activities I did, I really mostly focused on my studies…and basketball.”
Fortunately for Samueli, at the time of his attendance, the UCLA basketball team was in the midst of one of the most storied championship runs in sports history while under the leadership of legendary head coach John Wooden. In the span of 12 seasons, the team won a staggering 10 NCAA championships along with hosting to-be NBA legends such as Lew Alcindor (Kareem Abdul-Jabbar), Bill Walton, and Gail Goodrich.
He reminisces on what he calls a “Golden Era” in the school’s sports history, explaining “They had an 88 game winning streak when I was an undergraduate, in fact, I think as an undergraduate I don’t remember them losing a basketball game; they were that good!”
“It was really a great time to be a sports fan at UCLA, probably the best time in the history of the university. I just really enjoyed attending games whenever I could. You had to wait in line in front of Pauly Pavillion for two nights to get a ticket. The student section was impossible to get a ticket for. So…it was fun, fun times!”
In 1980 Samueli received his Ph.D. in Electrical Engineering from UCLA. His thesis was titled “Nonperiodic forced overflow oscillations in digital filters” and in his own words had to do with “Studying non-linear effects in circuits…a lot of work in analog circuits as well as digital circuits…it was very mathematical, basically, involving non-linear equations that had to be solved.”
The Road to Broadcom
Part of what positioned Broadcom as a stand-alone entity with virtually no competitor’s in its infant market was that nobody else knew how to build its products. The technology they had was so advanced, buyers had no place else to go. While pursuing his passion for electrical engineering, Samueli unknowingly placed himself at the forefront of a digital industry that would change everything…literally everything.
A New Field
While giving a speech at National Chiao Tung University, he examines the origins of how he found himself in such a fortuitous position, explaining, “The field that I chose to study for my Ph.D. was Digital Signal Processing; It was a very new field at the time. Again, in the seventies VSLI was a new field; the concept of putting tens…hundreds of thousands of transistors on a chip and how do you design a chip with that complexity?”
“That whole field of VSLI was new, the field of Digital Signal Processing was new. In fact, I took the very first courses, that were even taught, ever, at UCLA in Digital Signal Processing…fell in love with the field and pursued that for my Ph.D.”
By fate, luck, God, the universe or whatever you want to call it, Henry Samueli found himself in the right place, learning the right material, at the right time.
After finishing up his Ph.D., he was convinced to work on broadband communications at TRW; TRW was an aerospace and defense company. He proclaims it was “A VERY VERY Significant moment in my life because literally if I didn’t join TRW, none of this would have happened.”
“It was an interesting lesson because a lot of Ph.D.’s, when they finish, and they want to pursue a career in academia, they usually go right away and find an academic position and they join a university and they just continue doing what they were doing for their Ph.D. dissertation as a professor.”
Despite how much he loved academia, Samueli once again followed what his gut was telling him and that was to further his research into electrical engineering via TRW; the company also represented a new adventure for him in life, along with further networking opportunities.
Work Fulfill’s Passion
In describing the experience at his first job, he says, “I worked there for five years, full time, from 1980 to 1985. That was probably the best five years of my entire career in terms of the impact it had…that’s where I got my exposure to broadband communications – for military applications and not necessarily chips, it was more systems and hardware development.”
“In fact, when we built broadband modems back then, it was a rack of equipment 6 feet high and loaded with electronics. These were not chips. Chips just didn’t exist back then. We learned how to do systems engineering and hardware development to build these very complex broadband communications systems. I learned so much in those five years.”
The technical talk may be confusing. When he speaks of the six-foot-high racks of electrical equipment he calls a “Broadband Modem,” just think of it as a prehistoric version of the TV or WIFI modem you have at home. At the time Samueli is at TRW and this technology is only being used for defense purposes.
His work at the company provided him the ability to work on such systems in a manor which nobody else, probably on the planet, had access to.
UCLA Faculty Position
Five years into his career at TRW, Samueli is offered an opportunity that is too good for him to pass up; UCLA has contacted him, offering him the opportunity to become a professor.”
He explains his decision-making process, saying “I spent that five years at TRW and was then offered a tenure track faculty position at UCLA. I took it, which was a difficult decision by the way because working at TRW was one of the most exciting experiences of my career and I would have been happy to be an engineer there for the rest of my life.”
“But the opportunity to be a professor at UCLA was too hard to turn down. I accepted, took a big reduction in salary and loved it.”
Again, this theme of loving what you do.
Taking A Risk
While at TRW, he had the hunch that these six-foot racks of electrical wiring would have to change as technology improved. Therefore, he made a bold decision to launch a research program at UCLA doing just that; figuring out how to turn that stack of electrical gear into a small box that could fit just about anywhere, in any room.
He had no financial motivation at the time as no industry existed that could use this technology. He was in that sweet spot of aligning one’s work with passion.
He dives into detail, “When I joined UCLA, I had to start a research program. I didn’t choose to continue what I did for my Ph.D., which would have been the easy way. Instead, I chose to completely change my research from my Ph.D. and focus on broadband VSLI. A field that I didn’t know that much about…but I knew that it was so important because I saw the complexity of the systems we were building for the military and I knew that there’s no way you could just build six-foot racks of equipment every time you need to build a broadband modem. You have to figure out a way to put these on chips.”
“Even though everybody in research was focused on micro-processors for VSLI – that was the hot area – I decided no, let’s do broadband communications. It was very risky as a professor because there’s a huge start-up time before you can get research accomplished and papers published but fortunately, it worked out; I was able to get tenure.”
A Collaborative Effort
Samueli concocted a team of university professors and “Built a very successful research program in broadband communications VSLI chips. Built a nice, collaborative effort. An interesting time because most university professor’s, still to this day, they have their own thing, work independently, but I knew that in order to build the broadband VSLI chips it took more expertise than I had. I put a collection of professors together, we wrote some proposals to DARPA, and were funded to do this research.”
The research ultimately leads to the founding of Broadcom. He says “I didn’t plan on founding Broadcom, that’s another thing that I tell these entrepreneurs who have vision that they want to start a company but don’t know what it should be. It’s the other way around, first figure out what you’re gonna do with your life, then if you get lucky enough to be in the right circumstances, maybe you can found a company.”
“I thought I was going to be a professor for the rest of my life just like I thought I was going to be an engineer at TRW for the rest of my life. I’m a pretty stable guy, I don’t jump around a lot.”
Samueli co-founded the company alongside a firebrand of a man, named Henry Nicholas III. Henry was his first Ph.D. student and they worked together for some time at TRW. The two were a perfect match as they were each expert’s in differing fields of electrical engineering which allowed them to pick up the slack in area’s the other was not so educated.
Pulled into the Market
He says the opportunity fell into their laps, “We did all this very interesting work on putting these broadband modems and communication circuits on single chips and publishing all sorts of papers. Never filed for a single patent at UCLA. Again, I never thought I was going to start a company or needed to protect anything.“
“My mission as a professor is to publish papers, put knowledge into the public domain and make the world smarter. So that’s what I did, published lots of papers. All of a sudden I started getting phone calls from engineers in the industry saying ‘boy, this would be perfect for the project I’m working on. Have you ever thought of commercializing this technology?‘”
After getting enough of these calls, Samueli and Nicholas figure maybe they have something and start Broadcom. Other companies needed their chips.
First Big Break
An engineer in the digital cable TV market, at a company called Scientific Atlanta, needed to make a digital cable set-top box for Time Warner Cable to compete with Direct TV. DirecTV started as a spin-off of TRW and Hugh’s aircraft, therefore, already had some broadband capabilities.
Other networks needed to compete. Time Warner funded Scientific Atlanta to come up with their own modem, however, the engineers at the company had no idea how. Somebody had gotten hold of Samueli’s research papers so they reached out for help.
Scientific Atlanta gave them $1 million to build a chipset for that set-top box. They also invested $1 million into Broadcom for 5% of the company. Meaning a $20 million valuation from day 1. They never once needed venture capital funding. All funding came from strategic partners.
The whole digital Cable TV industry is launched and they begin building modems for pretty much every other cable company in America. Not to mention, they eventually got patents for the technology they created, which really destroyed any hope of competition because, again, nobody else could build this stuff or any other spin-off version of it.
The same way the TV market opened up to Broadcom, an engineer at Intel contacted them after seeing recently published research papers. They wanted to make WiFi modem’s, however, needed help on the technology end of things.
Samueli studies up on ethernet cables and reassure’s Intel that Broadcom can produce what they need. With the Internet boom of the early-2000’s onward, Samueli and Nicholas now find themselves producing the box-set WiFi modem’s that would begin entering every household in the country.
Broadcom was off to the races in a race where they were the only horse on the track…and they were still moving at top speed. It goes to show the beauty of Capitalism. How when you create something that makes the world a better place, that people find useful, then you will be compensated to the degree that you contributed.
Broadcom Corp. IPO
Broadcom went public in April of 1998. According to a CNN article of the time, “In yet another sign of investor euphoria with the Internet, shares of Broadcom Corp. soared nearly 200 percent in their initial public offering Friday before cooling off to a mere 123 percent gain by the market’s close.“
The company was soaring, however, the dotcom bubble was poised to burst and when it did, Samueli says “All the companies came crashing down in stock value, including Broadcom…and then we spent the next ten years recovering from that.“
Outside of Broadcom
Shortly after the IPO, Samueli and his wife, Susan, created a foundation for which one of their greatest initial gifts was to UCLA to endow the school of engineering. After the donation, the school was named the Samueli School of Engineering.
Broadcom was moved from Los Angeles to Irvine, CA, and hence, Samueli became a staple of the Orange County community. He made major donations to UCI, therefore moving them to rename their engineering school “The Henry Samueli School of Engineering.”
In 2017 Samueli and his wife, Susan, announced they’d be making a jaw-dropping $200 million donation to UCI to fund a first-of-its-kind College of Health Sciences.
According to Forbes, Samueli bought the Mighty Ducks of Anaheim from the Walt Disney Company in 2005 for $70 million. The Ducks then went on to become world champions after winning the 2007 Stanley Cup. The franchise is now worth an estimated $460 million.
A Kid and His Radio
In the end, when asked about the companies incredible success, he says, “Did we predict that that was gonna happen, no! We had no idea that that was gonna happen. It was just fortuitous timing. We happened to have the right technology…luck and timing play a huge role in the success of most entrepreneurs.“
Henry Samueli is not a Billionaire super-villain, he’s not a criminal, and, as a matter of fact, at no point in his life did he ever make a decision based on the money he could make. There are actually scenarios where he chooses to make less money in order to further his passions.
In many ways, Henry has always been that boy fiddling with a build-it-yourself radio kit on his parent’s living room floor. His whole life, he just wanted to figure out how it worked.