Broadcom said it will cut 2,500 jobs, about one-fifth of its total workforce, as part of a winding down of its cellular baseband chipset unit. The company made the announcement Tuesday in conjunction with its second-quarter earnings.
"We made the decision to pursue a wind down, which minimizes the ongoing losses from the business, and enables us to focus on our core strengths that much more quickly," CEO Scott McGregor said on the company's earnings conference call, according to a Seeking Alpha transcript. He said the company expects "ongoing customer commitments to decline over the remainder of the year."
The silicon vendor said in early June it was exploring whether to sell off or wind down its baseband business, an acknowledgement of the difficulties it has had in challenging the dominance of Qualcomm (NASDAQ:QCOM) in the baseband market.
Broadcom said it has already laid off 250 sales and administrative employees and expects to cut another 2,250 employees globally as part of the winding down of the baseband unit. As Reuters notes, those jobs are equivalent to about 20 percent of the 12,550 employees Broadcom counted in its 2013 annual report.
Broadcom said it has already recorded restructuring costs of $23 million related to the initial 250 job cuts, and that it also recorded $130 million of non-cash charges for the impairment of certain long term assets, such as property and equipment, as well as $34 million in inventory write-offs.
The company plans to book an additional $225 million in largely cash-based restructuring charges over the next 12 months related to the other 2,250 cuts. The company plans to close or consolidate 18 locations and end certain existing contracts.
As it moves away from basebands, Broadcom plans to focus on other businesses, including set-top boxes and modems for home broadband connectivity; small cells; chips for network infrastructure and data centers; and the Internet of Things and wearables.
McGregor said the decision to wind down the baseband business "puts Broadcom on the path towards being a stronger, more profitable company that can return more capital to shareholders. We have a renewed focus on the broadband connectivity and infrastructure markets, and are positioned well in these dynamic segments of the communication semiconductor market."
Broadcom was never able to truly catch up with rivals like Qualcomm, Intel and MediaTek on LTE chips, and analysts said last month that there were no obvious buyers for the baseband unit. Broadcom isn't the first to exit the business--Freescale, ST-Ericsson, TI and Renesas Mobile have also struggled to find buyers for their baseband businesses when they decided to exit.
In terms of its financials, Broadcom reported a loss of $1 million for the second quarter, down from the $251 million loss it reported in the year-ago period. The company's total revenue came in at $2.04 billion, down 2.3 percent from the $2.09 billion it scored in the second quarter of 2013.
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