By Anna Prior 

Broadcom Corp. said it is exploring strategic options for its cellular baseband business, including a potential sale or wind-down, as the chip maker focuses on the broadband, infrastructure and connectivity markets.

The chip maker said it has engaged investment bank J.P. Morgan in connection with its plans, and noted that a sale or wind-down of the segment could result in a roughly $700 million reduction in annualized research and development, and selling, general and administrative expenses. Of those savings, $100 million relates to estimated reductions in stock-based compensation, the company added.

Broadcom said it expects to reinvest roughly $50 million of those savings into projects in the broadband, infrastructure and connectivity businesses, which it noted should strengthen the company's plans in the area of small cells, embedded processing and low-power connectivity.

The company continued to back its revenue outlook for the current quarter of $2 billion to $2.1 billion, while noting that it expects product gross margin to be at or above the high end of its previous forecast range.

Shares rose 8.3% to $34.51 in recent trading.

Baseband chips, meanwhile, manage a phone's radio connection to wireless networks. The market for such chips has tough competitors, such as Qualcomm Inc., while big device makers like Apple Inc. and Samsung Electronics Co. design their own chips.

That environment, in part, led Texas Instruments Inc., which once derived a hefty chunk of its revenue from baseband processors, to wind down that segment in recent years.

Broadcom, meanwhile, in recent quarters has noted increased research and development expenses tied to cellular baseband technologies, and blamed the first-quarter operating loss for its mobile and wireless segment in part on the expenses. Revenue for the whole mobile and wireless segment for the quarter fell 10% from the prior quarter to $846 million.

Broadcom relies on the handheld-device market, as it makes chips for about half the world's tablets and smartphones, but the company has also sought to expand its share of the network-processor market.

The company in April said its first-quarter profit fell 14% as Broadcom's revenue and product margin slipped.

Write to Anna Prior at anna.prior@wsj.com

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