Boston, MA 06/02/2014 (wallstreetpr) – Semiconductor solutions provider Broadcom Corporation (NASDAQ:BRCM) has its sight set on big things in the coming years. As such, the company is not interested in businesses that will distract its progress. One such business that needs immediate consideration is Broadcom’s cellular baseband business. The company is flexible to pursue any opportunity with the baseband unit, and that included the sale or wind-down.
In seeking for alternatives on how to deal with the baseband business, the company expects a significant reduction its costs and expenses so that it can channel the savings to other promising investments.
In the latest move, Broadcom has attracted JPMorgan Chase & Co. (NYSE:JPM) to help with exploring alternatives for the baseband business. Although the investment bank will take a thorough look into the business and offer sound proposal on the best line of action, Broadcom, as already mentioned, is not ruling out possible sale or wind-down of the business as long as it gains strength in its other promising operations.
Big financial saving
According to Broadcom Corporation (NASDAQ:BRCM), the successful wind-down and sale of the cellular baseband unit is expected to lead to savings of up to $700 million in costs and expenses such as research and development and sales, general and administrative expenses. The company said the estimates do not reflect potential impairment or restructuring charges related to the sale or wind-down of the baseband business.
Reinvesting the savings
If the wind-down or sale of the baseband unit is performed successfully, Broadcom intends to reinvest the anticipated savings to improve its Broadband, Infrastructure and Connectivity units. The company intends to invest about $50 million annually in the aforementioned businesses from the anticipated savings.
The investment is expected to accelerate and strengthen the company’s position in small cell, embedded processing and low-power connectivity projects.
Broadcom Corporation (NASDAQ:BRCM) believes that the sale or wind-down of the baseband unit will leave it with stronger and leaner businesses that can support long-term revenue growth and profitability. The company updated on its 2Q2014 revenue. It expects revenue between $2 and $2.1 billion in the three months trading period.
Broadcom earned $0.51 per share in 1Q at a time when analysts were looking for $0.45. Revenue in 1Q came in at $1.98 billion, beating the consensus estimate of $1.96 billion.
