Irvine-based chipmaker Broadcom Corp. is expected to make significant job cuts as its $37 billion sale to Avago Technologies Ltd. nears completion, the Business Journal has learned.
The layoffs, which could be enacted before the end of the year, will target a swath of departments, including administration, human resources, legal and marketing, according to several sources with knowledge of the plan.
The cuts are expected throughout Broadcom’s global operations and likely will hit its Irvine headquarters especially hard.
Broadcom is OC’s 34th largest employer, with 2,400 local workers, according to Business Journal research. The company’s executive ranks are expected to be thinned out, with some getting “transitional offers” to stay on for several months, sources told the Business Journal.
Broadcom declined to comment for this story.
The latest development comes as the chipmaker begins construction on a five-building campus next to Orange County Great Park that calls for 1.1 million square feet in its first phase. The company has indicated that the project will continue after the sale to Avago.
Most of Broadcom’s engineers—a group that represents nearly 80% of its global work force of 11,000—will keep their jobs, according to sources.
Engineers facing cuts have job functions that overlap with those of counterparts at Avago.
Singapore-based Avago employed about 8,400 people worldwide through October 2014, according to its annual report.
Broadcom specializes in communication chips—which power Bluetooth, Wi-Fi, near-field communication and RF radio applications in some of the world’s most popular electronics made by the likes of Apple, Samsung, and HTC, among others. It also has strong business lines in broadband, set-top boxes, and data center and networking connectivity.
Avago, which maintains its U.S. headquarters in San Jose, has undergone an impressive diversification effort the last few years with expertise in radio frequency components, fiber optics, storage connectivity, and power amplifiers, among other technologies. Its smartphone offerings often sit next to Broadcom’s combo chips.
No Report
Broadcom has yet to file a layoff report with the California Economic Development Department, a requirement that mandates employers give a 60-day notice to affected employees and state and local agencies prior to “a plant closing or mass layoff.”
The expected cuts have nonetheless been looming since Broadcom and Avago announced their blockbuster deal in late May.
Avago indicated staff reductions would occur over an 18-month period following the sale, with annual cost savings hitting at least $750 million.
“Some of it will come very quickly—some of it will come at the end of those 18 months,” Avago Chief Financial Officer Anthony Maslowski said at the time.
Tan
Chief Executive Hock Tan said the cost savings would arise from “overlapping support functions,” such as sales, general and administrative expenses, and “probably some common engineering functions that both companies have in order to support their various product lines.”
Tan has been lauded on Wall Street for wasting little time in trimming acquired companies in an ongoing roll-up strategy—hallmarks that follow nearly every sizeable sale.
It acquired San Jose-based chip and software maker LSI Corp. for $6.6 billion last year in a move that brought it a leadership position in enterprise storage.
The company then sold LSI’s networking division to Intel for $650 million.
Avago—days after closing its $660 million acquisition of Emulex Corp. in early May—cut 49 workers at the Costa Mesa headquarters and another 39 at the networking gear maker’s San Jose operations, roughly 8% of its total work force.
The Business Journal in June reported that it put Emulex’ headquarters at 3333 S. Susan St. up for sale. The campus, which includes about 180,000 square feet of space spread over three buildings and another 3.2 acres of adjacent land, fetched nearly $50 million in a recent sale to Foster City-based investor and developer SteelWave. The sale closed in October.
The Broadcom sale, originally pegged to close in early 2015, could be final by year’s end as the transaction has quickly moved through shareholder approval and cleared regulatory hurdles with several agencies, including the European Commission, the U.S. Committee on Foreign Investments, and antitrust authorities in the U.S., Japan and Taiwan.
Chinese and South Korean regulators still have to weigh in, but the swift progression of approvals may have sped up the cost-cutting plan at Broadcom.
