* Co says exiting unit to save $700 mln annually
* Shares rise as much as 13 pct
(Adds analyst comment, details from conference call)
By Lehar Maan and Soham Chatterjee
June 2 Chipmaker Broadcom Corp said it
was looking to exit its cellular baseband business, and forecast
current-quarter margins to beat or be at the high end of its
The company's shares rose as much as 13 percent on Monday.
The cost-intensive cellular baseband business has been
losing market share and has weighed on Broadcom's margins.
The business was "significantly unprofitable," FBR Capital
Markets analyst Christopher Rolland said.
Broadcom on Monday said it would sell or wind down the
business as soon as it could, saving some $700 million annually.
"It's overdue, but definitely good news," Ascendiant Capital
Markets analyst Cody Acree said.
"We have said in 2014 wireless was make or break for
Broadcom - either they share some proven success or get out of
the business, or it probably cost the CEO his job."
Broadcom's chips integrating Wi-Fi and Bluetooth technology
are used in Apple Inc's iPhone and other top-tier
smartphones and tablets.
But its chips for low-cost smartphones have lost market
share to MediaTek Inc. In the 4G long-term evolution
(LTE) chip market, the company has been battling Qualcomm Inc's
Stiff competition has already forced big names such as Texas
Instruments Inc, STMicroelectronics NV and
Ericsson out of the cellular baseband chip business.
Broadcom, which has been spending on baseband technology
research and development, has seen operating profits fall at its
mobile and wireless business.
Sales at the business, which fetches almost half of the
company's revenue, fell 15 percent to $846 million in the first
quarter ended March 31.
Broadcom said it expected to save $600 million in research
and development and administrative costs annually by exiting the
baseband business, excluding an estimated $100 million
reduction in stock-based compensation.
The company had reported total operating costs and expenses
of $1.88 billion for last year.
Broadcom said it now expects both GAAP and non-GAAP product
gross margins to be at or above the high end its forecast.
The company had estimated in April that non-GAAP product
gross margin would rise by 75-175 basis points for the second
quarter ending June 30 from the first quarter's 52.2 percent.
Some analysts said finding a buyer for the baseband business
may be difficult.
"Those that want to be in the business are already there and
are more successful than Broadcom," Ascendiant's Acree said.
"Intel Corp may be a possible acquirer but it has
similar intellectual property."
Broadcom's technological roadmap had fallen behind peers
like Qualcomm, MediaTek and Marvell Technology Group Ltd
, FBR's Rolland said.
Irvine, California-based Broadcom's shares were up 9.6
percent at $34.92 on the Nasdaq, making them one of the top
percentage gainers on Monday.
(Reporting By Lehar Maan and Soham Chatterjee in Bangalore;
Editing by Joyjeet Das and Simon Jennings)