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June 3, 2014

Broadcom calls it quits in cellular baseband business

Expects to save $700m.

By CBR Staff Writer

Broadcom has decided to sell off or wind-down its cellular baseband business and reinvest in other areas including broadband, infrastructure and connectivity.

The announcement was being long expected by industry experts as Broadcom has been struggling to generate revenues from the unit amidst competition from Qualcomm and MediaTek.

Broadcom’s specialization in connectivity chips did not help the company as the mobile phone industry has been rapidly moving towards integrated chips, an area where its two rivals Qualcomm and MediaTek excelled.

The decision to close down or sell cellular baseband business is expected to yield $700m savings in the company’s expenditure; approximately $100m is estimated to reduce in stock-based compensation and $600m in research and development and selling, general and administrative expenses.

The company is planning to reinvest $50m of these savings in its broadband, infrastructure and connectivity businesses.

Investment bank JP Morgan is acting as the firm’s advisor.

"This incremental spending is currently expected to strengthen and accelerate the company’s plans in the area of small cells, embedded processing and low-power connectivity," Broadcom said in a statement.

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The baseband market, which is dominated by Qualcomm with over 50% share, has witnessed many dropouts in recent times. Texas Instruments and Freescale Semiconductor have exited the industry, while another top player Intel has not been faring very well.

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