After "testing the market" to find a buyer for its money-losing baseband chip unit (previous), Broadcom (BRCM +0.8%) has decided to simply wind it down, CEO Scott McGregor stated on the Q2 CC (transcript).
The chipmaker plans to cut 2.5K jobs (~1/5 of its workforce), and record $230M in charges (mostly cash-based) over the next 12 months. $164M worth of impairment/inventory charges were recorded in Q2.
Broadcom's baseband ops are only expected to account for $50M-$60M of expected Q3 revenue of $2.1B-$2.25B. In Q2, they accounted for $84M of the company's $781M in mobile/wireless chip sales (combo chip-dominated).
While mobile/wireless sales fell 8% Q/Q due to baseband weakness, infrastructure/networking sales grew 10% to $635M, aided by healthy Ethernet switching chip demand for data center and carrier hardware - heavy spending by Internet giants has bolstered the former market - and the displacement of internally-developed ASICs at switch OEMs.
Broadband chip sales rose 12% Q/Q to $625M, thanks to healthy modem and set-top IC sales. Broadcom says it's gaining emerging markets set-top share, and also benefiting from the adoption of advanced features (multi-stream transcoding, extra tuners, the adoption of MoCA home networking).