Broadcom has announced it is looking for an exit from the baseband chip market. The company released a statement saying that they are “exploring strategic alternatives for its cellular baseband business, including a potential sale of wind-down.” Leaving the baseband business could mean a large cost savings for the company, as well as moving out of a market dominated by Qualcomm. Broadcom estimates that it could see a reduction of $700 million spent on research, development, selling and other administrative costs related to its baseband business if it sells or shuts down the wing. Of that amount, $100 million will related “to estimated reductions in stock-based compensation.”
Chipmaker Broadcom Corp said it was looking to exit its cellular baseband business, and forecast current-quarter margins to beat or be at the high end of its estimate. The company’s shares rose as much as 13 percent on Monday. The cost-intensive cellular baseband business has been losing market share and has weighed on Broadcom’s margins. The business was “significantly unprofitable,” FBR Capital Markets analyst Christopher Rolland said. Broadcom on Monday said it would sell or wind down the business as soon as it could, saving some $700 million annually. “It’s overdue, but definitely good news,” Ascendiant Capital Markets analyst Cody Acree said. “We have said in 2014 wireless was make or break for Broadcom — either they share some proven success or get out of the business, or it probably cost the CEO his job.” Broadcom’s chips integrating Wi-Fi and Bluetooth technology are used in Apple Inc’s iPhone and other top-tier smartphones and tablets.
