In an unfortunate turn of events, Broadcom has decided to completely shutter their entire baseband modem business less than a year after acquiring Rensas’ own mobile modem business which had been under threat of also shutting down after originally being acquired from Nokia. This announcement came as part of the company’s earnings release yesterday, where they reported a $1 million loss on $2 billion in revenue (essentially break-even) compared to the previous quarter where they had made $165 million. But even so, Broadcom has announced that with the shuttering of this division they will be laying off approximately 2,500 people which are currently part of this business division.
The sad truth is that Broadcom’s board (and investors) never really gave this division a chance to actually compete with the likes of Qualcomm and Intel after the acquisition of Rensas Mobile’s division. We’re less than a year from when the acquisition was announced and the transaction wasn’t completed until October. Meaning, that They’ve been working with Rensas’ Mobile’s team for about 10 months and let’s also not forget that today isn’t the first time we’re hearing about this division having issues. Broadcom had already indicated that they were already looking to sell or shut down the division back in early June (Computex). But none of this really makes much sense in terms of a business decision primarily because the division’s latest and most prominent addition never really had much of a chance to prove itself. They certainly had some promising things at Mobile World Congress, but the lack of major design wins very likely hurt them.
In the end, it simply isn’t easy to build good modems and to be able to sell them, especially when you don’t have a competitive applications processor nor do you have a product that combines the two to save manufacturers money, design costs, and battery life. I’m sure a lot of people wish things had turned out differently, but the biggest problem for this announcement is that it means there’s less competition in the modem market once again. This announcement and Broadcom’s earnings lifted the company’s stock yesterday in after hours trading, however it should also be known that this will also positively reflect upon Intel and Qualcomm’s modem businesses. However, after seeing how poorly Intel’s own mobile business performed last quarter, they’re not in a much better situation than Broadcom, to be quite honest. If anything, this solidifies Qualcomm’s dominance as the leading global baseband modem provider and should set off some alarms within some of their customers of potential price hikes due to a lack of competition from basically everyone.