Broadcom Explores Strategic Alternatives For Cellular Base-band Business

(RTTNews) - Chip maker Broadcom Corp. (BRCM) Monday said it is exploring strategic alternatives for its cellular base-band business, including a potential sale or wind-down. The company backed its second-quarter revenue outlook, but sees product gross margin to be at or above the high end of its prior forecast. The shares rose about 12 percent in the morning trade.

Broadcom said it has engaged investment bank JPMorgan Chase & Co. (JPM) to assist in relation with its efforts.

According to the firm, a sale or wind-down of the cellular base-band business is expected to reduce research and development and selling, general and administrative expenses by about $700 million. Out of this, nearly $100 million is related to estimated reductions in stock-based compensation, the company said.

Excluding this item, adjusted research and development and selling, general and administrative expenses are now expected to be reduced by around $600 million.

Broadcom stated that its projections do not reflect impact of any potential impairment and/or restructuring charges that are likely to be recorded related to a successful sale or wind-down of the business.

Broadcom currently expects to organically reinvest about $50 million of these savings on an annualized basis into projects in the Broadband, Infrastructure and Connectivity businesses.

For the second quarter ending June 30, 2014, it still sees revenues to be between $2.0 billion and $2.1 billion. Analysts are currently looking for revenues of $2.05 billion for the quarter.

GAAP and non-GAAP product gross margin is anticipated to be at or above the high end of its previously-guided range, driven mainly by mix.

Earlier, the company forecast GAAP product gross margin to increase 100 to 200 basis points and non-GAAP product gross margin to rise 75 to 175 basis points.

It was in last September that Broadcom agreed to acquire the LTE-related assets from Japanese chipmaker Renesas Electronics Corp. for about $164 million in cash.

BRCM is currently trading at $35.65, up $3.78 or 11.86 percent, on a volume of 7.15 million shares.