Broadcom will sell or “wind down” its cellular baseband business

Broadcom logoBroadcom today announced that it is "exploring strategic alternatives for its cellular baseband business, including a potential sale or wind-down." Exiting the market will save the company $700 million a year in research and development, sales, administrative expenses, and other costs, Broadcom said.

Broadcom said it will use $50 million of the annual savings for "projects in the Broadband, Infrastructure, and Connectivity businesses. 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."

Baseband processors provide cellular connectivity for mobile phones and other devices. Broadcom has been less successful with basebands than with its Wi-Fi technology. For example, the Samsung Galaxy S5 uses a Broadcom Wi-Fi chip but relies on a Qualcomm Snapdragon processor for LTE baseband support.

Qualcomm dominates the cellular baseband market with 64 percent revenue share, according to Strategy Analytics. MediaTek and Intel were second and third in Q3 2013 with 12 and 8 percent share, respectively, with Broadcom struggling to make a dent. Broadcom had 4 percent market share in Q1 2013 and apparently hasn't budged much.

"The LTE baseband landscape is expected to be a crowded one in 2014 with several vendors including Broadcom, Ericsson, Intel, Marvell, MediaTek, NVIDIA, Spreadtrum and others... all set to bring commercial multi-mode LTE chip products to the market and this could help drive LTE down into mid-to-low tier devices," the analyst firm said in February.

Broadcom reported $1.98 billion in revenue and $165 million of net income in Q1 2014 but said that declining revenue and increased investment in cellular baseband technology contributed to an operating loss of $32 million in its mobile and wireless segment. "Due to the lengthy product development and sales cycle for LTE products, our ongoing investment in LTE-related technologies negatively impacted our operating results and may continue to do so until we realize significant revenue," the company said.

Source: Ars Technica

Tags: Broadcom

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