The chase is over. After Emulex rejected Broadcom's $912 million offer, its suitor today called off the hostile buyout effort.

Broadcom Chief Executive Scott McGregor, who only two weeks ago sweetened his bid 20% from $764 million, said his Irvine network equipment company will now pursue "other value-creating alternatives." The company said it would not renew its offer when the offer expires July 14.

The announcement ends a contentious process marked by lawsuits lobbed by both Orange County companies. Broadcom initially had sued to invalidate an Emulex poison pill designed to ward off hostile takeovers. Emulex, based in Costa Mesa, countered with a lawsuit charging that the antics of former Broadcom chief executive Henry Nicholas made the company untrustworthy. 

Nicholas, who is no longer involved in Irvine company he founded, is awaiting criminal prosecution on two federal indictments, one on a stock backdating charge and another alleging he had supplied narcotics to acquaintances.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.

Broadcom Chief Executive Scott McGregor launched a hostile bid for Emulex after being rejected in December. Credit: Gina Ferazzi / Los Angeles Times

Emulex's board this morning formally rejected an unsolicited buyout offer from its Orange County neighbor, chip maker Broadcom, saying the $764-million cash offer was "opportunistic." The Costa Mesa networking equipment company said the bid "significantly undervalues Emulex and is not in the best interest of Emulex stockholders."

Irvine-based Broadcom lobbed the hostile bid on April 21, four months after being quietly rejected by Emulex's board. Broadcom makes, among other things, networking equipment that connects high-powered servers, while Emulex's chips connect storage disks containing massive amounts of data, called fibre channel storage. Scott McGregor, Broadcom's chief executive, said the two companies could combine their technologies to create equipment that can do both interchangeably, entering a market segment called "converged networking."

But Emulex sent a strong signal during its third-quarter earnings call last week that it intended to tackle that market without Broadcom. "Emulex has made the transition from a fibre channel storage company to a converged networking company," Emulex Chief Operating Officer Jeff Benck said. "We have a winning strategy. We are executing that strategy. And we are building a next-generation network convergence company."

Many analysts had expected Emulex to reject the $9.25-a-share bid because its shares, which closed at $6.61 a share the day before Broadcom launched its bid, had traded close to $14 a year earlier.

Emulex shares were trading up nearly 3% this morning, at $10.67. Broadcom was up more than 2%, at $23.59.

Glenn Hanus, an analyst with Needham & Co., called Broadcom's offer "credible but opportunistic," saying that the bid could put Emulex in play. "We believe that there could potentially be other interested partners," he wrote in a note to investors.

Read the full text of the letter to McGregor from Emulex Executive Chairman Paul Folino, after the jump.

-- Alex Pham

Henry Samueli, the co-founder of Broadcom and owner of the Anaheim Ducks hockey team, pleaded guilty to lying to federal authorities who were investigating stock-options fraud at the Irvine-based chip maker.

The agreed-upon penalty: five years of probation and $12.2 million in fines. Samueli won't have to testify for the government, according to court documents.

Read the full story for more details.

-- Chris Gaither

Photo by Christine Cotter / Los Angeles Times

The case against Henry T. Nicholas III is getting juicier.

One of the two indictments against the Broadcom founder that were unsealed today alleged that Nicholas put Ecstasy in the drinks of unsuspecting high-tech executives, bought prostitutes for customers of the Irvine-based chip company and both used and distributed illicit drugs, including cocaine and methamphetamines.

The second indictment deals with your classic Silicon Valley scandal: It accuses Nicholas and a co-defendant of conspiracy to backdate Broadcom stock options to boost their value without properly reporting the expense to shareholders.

Nicholas' lead attorney, Brendan V. Sullivan Jr., responded: "Dr. Nicholas will contest these charges vigorously. He is confident that he will be fully vindicated."

For aficionados of rich-people-being-naughty stories, there's this delicious tidbit from the story by Scott Reckard and Kim Christensen: The pilot of a private plane taking Nicholas and guests from Orange County to Las Vegas had to put on an oxygen mask because they smoked so much marijuana.

The partying wasn't reserved for the air, the government says. According to the story, the indictment also lists a few properties allegedly used for nefarious purposes:

• An equestrian estate in Laguna Hills, where Nicholas had constructed a warren of tunnels and underground rooms, including one that contractors alleged was intended to become a secret "sex lair."
• A warehouse-office complex in nearby Laguna Niguel, which contractors said was used for the same purposes and nicknamed "The Ponderosa."

If you're interested, here are PDFs you can download of the drug indictment or the stock-options indictment.

-- Chris Gaither

Photo by Richard Hartog / Los Angeles Times

How's this for a blockbuster: Henry T. Nicholas III, co-founder of Irvine-based Broadcom, surrendered to authorities this morning after a federal grand jury indicted him on fraud and conspiracy charges. He and former Broadcom Chief Financial Officer William Ruehle were named in an alleged scheme to manipulate stock options.

Nicholas also was indicted on two federal drug violations. The indictment said Nicholas violated prescription drug laws and maintained a residence where drugs were used.

Scott Reckard and Kim Christensen will update the story throughout the day as they get more details.

-- Chris Gaither

Photo by Richard Hartog / Los Angeles Times

Broadcom's Henry Samueli stepped down as chairman of the Irvine chip maker's board of directors today after federal regulators alleged that he and co-founder Henry T. Nicholas III fraudulently backdated stock options in a five-year scheme.

Samueli, who owns the Anaheim Ducks, also will take a leave of absence as Broadcom's chief technology officer, the company said in a statement. John E. Major, an independent director, was named non-executive chairman.

We've got the full story here.

-- Chris Gaither

The Securities and Exchange Commission filed a civil fraud complaint against Broadcom co-founders Henry T. Nicholas and Henry Samueli, owner of the NHL Anaheim Ducks, in an alleged scheme to systematically backdate stock options.

The complaint comes on the heels of an SEC lawsuit filed against the Irvine-based chip maker on April 22 alleging that Nicholas, Samueli and other senior Broadcom executives "orchestrated and carried out" a long-running scheme to backdate stock options. Broadcom agreed to pay $12 million to settle the lawsuit.

Kim Christensen and E. Scott Reckard have the full story here.

No comment yet from the accused, but keep checking back.

UPDATE: Nicholas declined to comment to the Times through his attorney. Samueli's lawyer, Gordon A. Greenberg, criticized regulators for "trying their case in the media" and said his client had relied on "management and other professionals" to ensure that options were granted properly. "The SEC press release failed to mention that an independent team of lawyers and forensic accountants hired by Broadcom's outside board members in 2006 thoroughly examined Broadcom's options granting processes and filed a report with the SEC that fully exonerated Dr. Samueli," Greenberg said.

-- Chris Gaither