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Broadcom: If no one buys our modem biz, we'll DITCH IT

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Anonymous Coward

Incoming...

Another oligopoly, one of the advantages* of globalisation.

* to rich shareholders.

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Re: Incoming...

Yup ... another one bites the dust.

What does that leave? ... The incumbent (Qualcomm) and the underdog (Intel) I believe.

Plus a few bit players like Spreadtrum and Mediatek.

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Re: Incoming...

No, MediaTek is a very much stronger player in this market than Intel. Remember Intel dropped out of this space before selling it's mobile chip business to http://www.marvell.com/.

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The story of Renesas Mobile is a desperately unfortunate, one of great technology being undermined by a few poor decisions.

In 2011, Renesas Mobile had the world's fastest LTE modem (SP2531) and the world's fastest Android application processor (APE5R).

It led again in 2013, with APE6 (8 cores, 4x2GHz A15, 4x1GHz A7, lead with Rogue 6 GPU, the same one that went into A7) and the SP2532 CAT4 LTE modem.

The MP5232 should have been in shops in Q2, and would have been the cheapest LTE SOC on the market at the time.

I'm sure the story of why those things didn't happen will become public some day, let's hope those who made it happen (~60 remaining in Farnborough in the UK) and the great work they did don't get thrown on the scrap heap.

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No Point

There's no point in buying it now. If they've already threatened to scuttle it just wait till they do so and it's a salvage operation, not a business acquisition and you don't have to deal with any potential blowback that you get when acquiring a still breathing asset. Liability doesn't transfer after an operation has been pronounced dead. There's no reason for anyone to hurry.

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Re: No Point

There might be IP reasons to buy.

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Re: No Point

Likely all IP is transferred to Mothership and isn't included. Which would explain why it won't sell.

Qualcomm has bought many smaller companies and shuttered them. Basically to strengthen IP portfolio.

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Re: No Point

The actual modem SW asset is up to date and ready to deploy in the market. If you're a company who does processors but you don't have a baseband (such as Apple, Allwinner or Rockchip), then buying this asset would give you that.

Or if you've got a chipset that could benefit from getting a baseband that is at the cutting edge (such as Spreadtrum, RDA Micro), then it's a reasonably cheap way of catching up.

Or if you're any one of a plethora of mobile electronics makers without any particular technological edge in the mobile arena (e.g. Dell, Acer, Asus, Lenovo, Sony, LG, and so on...), it would also give you a springboard upon which you could differentiate yourself.

Many who *could* buy it (presumably they'd offload it for a few hundred million), but how many will?

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Anonymous Coward

Re: No Point @Mage @Don Jefe

The IP is almost worthless without the people to go with it (documentation? what documentation?), so any deal to offload the staff would have to include the IP otherwise both ends of the deal are screwed. Broadcom would have IP but no way of using it, and the buyer would have staff who know what to do with the IP, but no IP to play with.

Same applies if the buyers wait until Broadcom shuts the division down - all the staff leave, and the IP becomes worthless without the people to implement it.

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Re: No Point @Mage @Don Jefe

If the only documentation for your product is stored inside staff you don't have a company. You've got a studio and you sure as shit don't have much to acquire.

Sure, with extremely complex products there may be a few key staff members who can accelerate integrating the new acquisition into your existing business. But absolute dependence on the overall staff is not just a bad idea, it's financially irresponsible in the extreme.

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@Don Jefe

Don, your comments on the Moto factory closure—which were reasonable enough for me to up vote—asked where we got our cynicism. Well, it's deal likes this. Broadcom will save $600m by closing the operation, and the rise in share price will reward an executive - either through shares they own or through performance related pay. Maybe it's an exception, but these cases turns up frequently in the headlines and it leaves us at the bottom feeling rather bitter when faced with closures.

As for the rest, I will tell my boss I need time to write documentation and see how he reacts. But even the best documentation is no substitute for experience; if nothing else, it takes time to read and absorb the paperwork.I'm afraid some of your value is stuck in our heads.

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Re: No Point

There's no point in buying it now

Well I'd make an offer if they'd accept it. True, I've got no money and no experience (apart from having a half dozen Raspberry Pis around the place and having experience with using mobile phones), but I'm sure that the team is well on top of things and if they'll have me, I'd gladly be their leader.

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Re: @Don Jefe

I think there is some confusion here. Perhaps I should have said there's no point in buying it at this time as opposed to there's no point in buying it now.

Broadcom has formally announced they are going to do away with the cellular modem unit, through acquisition or just scuttling it. Because of that their share price has risen all it is going to related to that business unit. When the unit is finally sold, or sunk, you can expect their share price to lose a dollar or two as there is nothing else in the pipe. If sold the price won't offset the revenue loss and that $600M expense reduction has already been counted by shareholders. The positive financial impact of the cellular modem business unit is done; no matter what ultimately happens to it. Their wad has been shot.

Since the future of this has been preordained by Broadcom's decision to publicly sacrifice the unit, in exchange for a bump in share price, there is simply no justification for anyone to pay anything beyond the base value of whatever is actually going to convey with the sale. The unit is now a time bomb and every day that passes brings Broadcom's next 10-K filing a little closer and lowers the price even more. Broadcom investors will be murderously angry if that unit isn't completely gone by the next 10-K. If it's not they just lost 25% of what they bought at the time of the announcement.

So you just wait. They'll practically give it away soon, since there can't be anymore gain from the unit, it can only cause damage.

This is a drastically different thing than the Moto facility closure. This is using corporate accounting practices to increase share price now by promising to cut $600M in expenses tomorrow. This is a company selling an asset that is so expensive to run that eliminating the associated expenses is worth more than the revenue or profit it generates. This was an investment that didn't pan out and was greatly effected by other industry activity. Nokia's mobile component now belonging to MS being a major issue (incidentally, I expect it'll be MS that buys the Broadcom unit for pennies). All investments don't pay off, but you've got to try.

The Moto closure was a fucking disaster and should never have occurred. Everybody in manufacturing could plainly see the entire concept was stupid and going against more than 150 years of good manufacturing practices. It was a terribly expensive mistake where somebody didn't understand the difference between 'disruptive' and 'there are reasons we don't manufacture things that way anymore and we haven't since everybody commuted on horseback': Different isn't always better and when you're dealing with an industry where you spend $10M to eliminate part worth less than a penny you're going to get burned if you jump in without really knowing your shit.

Broadcom's cellular modem unit was a calculated risk, that's business. The Moto facility was just stupid and could never, ever have succeeded. Broadcom won't be out too much because they calculated the risks. Googlrola didn't calculate shit. If somebody gave you 100% of the money to open a new manufacturing facility and you close it a year later you are still going to lose just obscenely huge amounts of money. That's not optional, variable or subject to 'maybe'. That's a constant in manufacturing and they ignored it.

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Re: @Don Jefe

On the documentation bit, it's a good sign your employer probably isn't about to be sold off, so there's some security there :)

When you're buying a tech oriented company the resources required to integrate the purchase are a major component in the final sale price. When I was still working for hedge funds what we kept, what we sold and what we tossed out was largely based on how much effort and expense it took to make the 'thing' worthwhile. We bought more than a few software companies where the specs documents were the only thing valuable in the company. You can toss everything else out and rebuild it from scratch cheaper than fighting through reams of agile bullshit. The only reason companies tend to stick with constant versioning to fundamentally flawed products is that changing the tire on a moving car is fucking hard. But if you buy the car you can pull over and fix everything with a lot less pressure.

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Re: @Don Jefe

Thanks for the replies Don. :) I see the difference now. But hopefully you can see why us ants overlook the subtly of it all: when you're 3mm long and living on the ground, the footprints look about the same.

I've been involved with enough "lets rebuild it from scratch" projects to be wary of them. Programmers certainly relish it. (I did in my youth...) But it's easy to underestimate how much work is involved and you've got to dodge second system syndrome. Clearly it can work (e.g. clang vs gcc) but judging that moment is a tricky. Ideally I'd start half the team developing the replacement while the other half continue on the existing system. But if I was taking over a team that needed to rebuild their system, the first thing I would sort out is the culture that allowed such a monstrosity to develop. And a University is the only place I've worked where the documentation was the most valuable thing. ;)

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Anonymous Coward

Worth noting

The division being sold isn't just the baseband stuff - but also includes mobile multimedia (camera, video, 3D graphics), which means the Videocore, mobile platforms, test teams etc.

It's over 2500 people including lots in the UK.

Broadcom supply the chip used on the Raspberry Pi...

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Sad

If you can't make money in a market with an addressable size of a billion units a year, something is wrong somewhere, which may account for the reason there are no takers.

Is this because the trend is towards wanting to integrated the baseband onto the SoC? AFAIK Qualcomm and NVidia are the only one selling such a SoC as of today. Are they eating the market alive, or is Broadcom seeing the writing on the wall and getting out while they (hope) they can find someone willing to buy it?

That Samsung or Apple aren't interested in something that presumably has a pretty low price approaching $0 (if they're willing to ditch it if there are no buyers) then either it isn't as attractive as they seem to think or any interested players have already made their own arrangements.

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Re: Sad

Renesas Mobile had an LTE SOC ready for mass production last june. It eventually went into the Samsung Core LTE after Broadcom acquired it.

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Anonymous Coward

Re: Sad

Broadcom have been selling integrated SoC for a couple of years. A few SS phones use them. But the margins are shite, and you need to sell a shitload of them.

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Complicated stuff requiring good engineering

That's not sexy any more since evil Steve showed that you can do without good engineering.

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Anonymous Coward

If Samsung wants to use their own processors then the better get a modem chip to support them. Look at what they do when LTE is required, use a Qualcomm SoC.

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Anonymous Coward

it's not just the LTE

Samsung also turn to Qualcomm because of the Kraits simply blow everthing else out of the water. Their graphics engine is a beast as well.

I really think apple ought to buy the wireless unit. it'll give their semicon unit a boost to go with the pretty amazing a7 and latter processors.

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