As the meteoric rise of mobile devices continues, an interesting way to play the multi-year secular growth story of these revolutionary devices has been to invest in semiconductor component suppliers with a good amount of exposure to these hot gadgets. Broadcom Corporation (NASDAQ:BRCM) is a chipmaker that, has enjoyed tremendous success during this mobile “boom” with its connectivity combo chips (which combine Wi-Fi, GPS, Bluetooth, and NFC into one chip).
Unfortunately, the most recent quarter wasn’t exactly what shareholders were looking for. Thanks to a weaker-than-expected performance in mobile and wireless (driven largely by 3G baseband weakness), coupled with fears that the company’s 4G LTE baseband efforts would be later-than-expected (material revenue had been pushed into the second half of 2014) as well as fears of potential connectivity combo chip share loss, Broadcom Corporation (NASDAQ:BRCM)’s shares saw a haircut of over 33% of their value nearly overnight.
However, on September 4, Broadcom Corporation (NASDAQ:BRCM) announced that it had acquired the cellular assets of Renesas Electronics, and I believe that it’s time for investors to take notice as this could really be a game changer for the company.
What’s the scoop?
There’s no doubt that cellular baseband and RF are very difficult, and Qualcomm’s long heritage as a cellular and wireless company has allowed it to essentially monopolize the LTE handset market over the last couple of years. Broadcom Corporation (NASDAQ:BRCM), Intel, and NVIDIA have been very rapidly pushing their own LTE efforts in a bid to finally offer an alternative to Qualcomm’s offerings, albeit roadblocks and delays have been the name of the game for each of them.
Earlier this year, Broadcom Corporation (NASDAQ:BRCM) began showing off its own discrete LTE modem and had promised that it would begin shipping for revenue at some point during 2014. Of course, investors got a little ahead of themselves and believed that revenues from this effort would be an early 2014 event and thus were disappointed when management noted that this would actually be a second half of 2014 event.
However, the acquisition of Renesas Electronics’ struggling mobile division (that had been in the process of winding down), seems to really change the game for Broadcom Corporation (NASDAQ:BRCM). Right off the bat, the company gets a fully integrated system-on-chip with an LTE-Advanced cellular baseband that’s validated with multiple carriers including AT&T and NTTDoCoMo. Management expects to be able to deploy this very quickly with material revenue coming in the early part of 2014.
