TOKYO — Broadcom Corp. surprised many in the mobile industry Wednesday (Sept. 4) by announcing a definitive agreement to acquire LTE-related assets from Renesas Mobile.
With the new acquisition deal, Broadcom, which has shipped no LTE products to date, will suddenly own a dual-core LTE SoC, developed by Renesas Mobile, ready for volume production and certified by leading global operators in North America, Japan, and Europe.
Along with Renesas Mobile’s high-quality multimode, multiband, LTE-A/HSPA+/EDGE modem IP, the Irvine, Calif.-based company also inherits 1,200 employees -- mostly engineers -- from Renesas Mobile Europe and Renesas Mobile India.
For the acquisition, Broadcom said that it expects to pay approximately $164 million in cash. When Renesas Electronics bought Nokia's wireless modem business three years ago, the Japanese company paid about $200 million.
Will Strauss, president of Arizona-based market research firm Forward Concepts, told EE Times, "The Broadcom announcement was a total shock, since Renesas already said that it would pull the plug on Renesas Mobile."
Strauss is referring to an announcement by the ailing Japanese chip vendor Renesas Electronics Corp. in late June: termination of its wireless modem business.
Strauss noted, "Actually, long-suffering Broadcom's LTE program was a long way from a fielded product. Now, they say they'll be shipping LTE in 1H/14. After all, the Renesas part has been qualified at Verizon, AT&T and NTT DoCoMo."
Further, Strauss described the $164 million acquisition price "a relative bargain," because the cost of developing multimode LTE Modem from scratch is higher than the amount Broadcom will pay.
To be clear, Broadcom had an internal team developing LTE products. Broadcom unveiled earlier this year at the Mobile World Congress a 4G LTE-Advanced modem implemented in a 4G LTE smartphone reference platform, demonstrating its carrier aggregation capabilities.
Forward Concepts' Strauss, however, noted, "Consider that Broadcom has been working on LTE for at least 3 years and didn't seem to be near a shippable product… until now."
Gary Mobley, financial analyst at the Benchmark Company, wrote Wednesday in his research note about the deal:
While the acquisition is expected to be ~$0.12 dilutive during the first quarter of ownership (4Q13), we view the acquisition as strategically important for Broadcom and should add further credibility to the company as an alternative merchant baseband chip supplier to Qualcomm, which is especially important since the merchant baseband chip industry has consolidated significantly in recent months.
Forward Concepts' Strauss agreed that the acquisition gives Broadcom "better footing with Qualcomm." But he cautioned, "Qualcomm has years of ecosystem keeping them in front for some time."