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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