Broadcom Explores Strategic Alternatives For Cellular Baseband Business

(RTTNews) - Chip maker Broadcom Corp. (BRCM) said it is exploring strategic alternatives for its cellular baseband business, including a potential sale or wind-down. The company has engaged investment bank JP Morgan in relation with its efforts.

Currently, the sale or wind-down of the cellular baseband business is likely to result in around $700 million reduction in annualized GAAP research and development and selling, general and administrative expenses, out of which nearly $100 million pertains to estimated reductions in stock-based compensation. As such, non-GAAP research and development and selling, general and administrative expenses are now expected to be reduced by roughly $600 million. These projections don't reflect the impact of any potential impairment and/or restructuring charges that are likely to be recorded related to the successful sale or wind-down of Broadcom's cellular baseband 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. The company said this incremental spending is likely to strengthen and accelerate the company's plans in the area of small cells, embedded processing and low-power connectivity.

In addition, Broadcom has updated its business outlook for quarter ending June 30, 2014. It still sees revenue between $2.0 billion and $2.1 billion, while now expecting both GAAP and non-GAAP product gross margin to be at or above the high end of the previously-guided range, driven mainly by mix.