Irvine-based Broadcom Corp.’s quiet exit from the Blu-ray disc and digital-television business a few months ago was part of a broader restructuring plan that will eliminate 300 positions companywide, according to filings with the Securities and Exchange Commission.
The county’s largest chipmaker—with 2,300 Orange County employees—took a $16 million charge in 2011 related to restructuring costs as it pared down slumping businesses such as Blu-ray and DTV in favor of growth markets with higher margins.
The company entered those segments in 2006 with the industry’s first complete Blu-ray/HD DVD chip system for universal media players and a single-chip designed for high-definition digital TVs.
Broadcom specializes in communication chips that go in tablets, smart phones, set-top boxes, broadband modems, networking gear and other products.
• Headquarters: Irvine
• Founded: 1991
• Business: chipmaker
• Ticker symbol: BRCM (Nasdaq)
• Market value about $20 billion
• Notable: Exits Blu-ray, digital TV lines, plans to cut 300 jobs
Chips for Blu-ray players and digital TVs fall under the company’s Broadband Communications business line, which also includes chips for cable, satellite and IP broadband networks, set-top boxes and other wired home-networking devices. The line saw about $2 billion in sales last year, down 4.5% from a year earlier.
Broadcom’s exodus from Blu-ray and DTV wasn’t a shock: It failed to see technological and customer gains from those segments that usually follow chip introductions.
“Broadcom has likely taken a pragmatic look at the market and concluded that its money is better spent elsewhere,” Paul Gray, director of European TV Research, wrote in a blog for NPD Group’s DisplaySearch market research consultancy in Santa Clara.
Office Closings
Company officials didn’t respond to Business Journal queries dating from September, when reports of the company’s exit from Blu-ray and DTV first circulated. Broadcom reportedly shut offices in Toronto, Pennsylvania and China that specialized in those segments, eliminating 100 engineering and marketing positions.
It’s not clear whether any of the additional job cuts will hit Orange County.
Broadcom employed about 9,590 employees companywide as of Dec. 31, about 100 less than in the September quarter, Chief Financial Officer Eric Brandt said in an earnings call with analysts last week. The restructuring will trim the work force by about 3%.
Brandt also disclosed a rare breakout of financial data for the operations: Blu-ray and digital TV generated $125 million, or a little less than 2% of Broadcom’s nearly $7.4 billion in revenue in 2011.
Broadcom’s net revenue in the fourth quarter fell 6.4% to $1.82 billion, just topping Wall Street expectations.
“The drop in Q4 can virtually entirely be explained by the reduction in the consumer-electronics business, the DTV and Blu-ray business,” Brandt said. “That business was not particularly attractive from an operating-margin or even a gross-margin perspective.”
