Broadcom has agreed to acquire Renesas Electronics' LTE modem business for USD 164 million. Renesas announced earlier this year plans to withdraw from the mobile market, after seeing a sharp drop in volume after it acquired Nokia's chip business.
Broadcom said the deal will help it accelerate development of its first multi-mode LTE SoC, which is expected to launch in early 2014. The acquisition includes a dual-core LTE SoC that is ready for volume production and has been validated by operators in North America, Japan and Europe. Broadcom also receives patented technology and experienced engineers in multimode, multiband, LTE-A/HSPA+/EDGE modems, including support for emerging features such as carrier aggregation and VoLTE.
The loss-making activities will weigh on Broadcom's earnings in the near term, but it expects to have the business breakeven by the second half of 2014 and turning an adjusted profit in 2015. The takeover, which includes activities in Finland and India, is expected to close early in the fourth quarter.
Broadcom expects the deal to reduce adjusted EPS by USD 0.12 in the three months to December and by USD 0.10-0.15 in the full year 2014. For the current quarter ending 30 September, Broadcom narrowed its revenue guidance to USD 2.075-2.175 billion, from an earlier outlook of USD 2.05-2.20 billion. The gros margin will increase more than expected, by 50-100 basis points rather than the half percent point previously estimated, while R&D expense will be somewhat higher than forecast.
