Cellular exit drives Broadcom to cut 2,500 jobs
Broadcom will downsize employees, affecting 2,500 individuals, after the company failed to sell its cellular base band business. It recently reported neither profits nor revenue growth for its latest quarter.
Broadcom will take a $417 million charge, about $150 million of it this quarter, for the restructuring which will include closing or consolidating 18 offices. "The decision to exit the cellular base band business puts Broadcom on a path to being a stronger company," said Broadcom's chief executive Scott McGregor.
The decision underscores the significance of the smartphone market and how it is consolidating into the hands of fewer, larger system and chipmakers. The layoffs represent about 20 per cent of Broadcom's 12,400 employees.
With its decision to exit the market, Broadcom's cellular SoC business will fall quickly. It is expected to decline to about $50 million in the third quarter and then about half of that in the last quarter of the year.
Broadcom expects the next two quarters will be fairly flat overall with revenues estimated at about $2.14 billion and $2.04 billion respectively.
Despite the cellular move, Broadcom's sales of connectivity chips such as Wi-Fi and Bluetooth will rise in the next quarter, in part due to new system launches planned by partners. However, those products may lose some sockets long term for designs paired with base band sales, McGregor said.
On the bright side, McGregor said Broadcom is leading a move to 25Gbit/s Ethernet for data centres, which represent about two-thirds of its infrastructure revenues. The company has a leading position in the HEVC codec for Ultra HD resolution systems with design wins beginning this year but revenues not starting until next year, he said. In addition, he predicted growth in the company's chips for automotive and the Internet of things sectors.
Broadcom reported revenues of $2.04 billion for the second quarter, up 2.9 per cent from the first quarter but down 2.3 per cent from the second quarter of 2013. The company reported a $1 million loss down from profits of $165 million in the last three months and up from a loss of $251 million in the second quarter of 2013.
The company reported 55 per cent gross margins, a historically high figure. It will spend more than $800 million to repurchase stock, twice the amount previously planned.
- Rick Merritt
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