SAN JOSE, Calif. — Broadcom will lay off about 2,500 employees as part of a decision on June 2 to exit the cellular baseband business for which it could not find a buyer. The news came in a call with financial analysts in which the company essentially 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 baseband 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 chip makers. The layoffs represent about 20% 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 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 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 baseband sales, McGregor said.
On the bright side, McGregor said Broadcom is leading a move to 25 Gbit/second Ethernet for data centers 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% from the first quarter but down 2.3% 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% gross margins, a historically high figure. It will spend more than $800 million to repurchase stock, twice the amount previously planned.
— Rick Merritt, Silicon Valley Bureau Chief, EE Times