Broadcom (BRCM): Wells Fargo Negative on Possible Exit from Baseband Business

On Monday Broadcom Corporation (NASDAQ: BRCM) announced it is exploring strategic alternatives for its cellular baseband business, including a potential sale or wind-down. In the view of Wells Fargo analyst David Wong, exiting the business will weaken Broadcom's competitive position in connectivity.

"While at first blush it would appear that this saving of $650 million in operating expenses (close to 20% of Broadcom's total operating expenses) might help Broadcom's profitability, we think that the exit of the baseband business may weaken Broadcom's competitive position in connectivity and other chips for wireless handsets. We believe a substantial portion of the close to $4 billion of annual revenue (about 47% of total revenue) that Broadcom's Mobile & Wireless division contributed in 2013 is associated with baseband, connectivity and other content in wireless handsets," said Wong.

"We remain cautious on Broadcom with a Market Perform rating," he added.

For an analyst ratings summary and ratings history on Broadcom click here. For more ratings news on Broadcom click here.

Shares of Broadcom closed at $31.87 yesterday.

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