Why This Broadcom Ltd. Rumor Is Probably False

By Ashraf EassaFool.com

Image credit: Broadcom.

Continue Reading Below

In a pre-publication note in DIGITIMES, it's claimed that Broadcom , a very broad-based semiconductor company that's known for -- among other things -- its successful mobile Wi-Fi chip business, is planning to "phase out" its Wi-Fi chip business. The note claims that this move would be in a bid to "streamline its workforce and product offerings" following the acquisition of Broadcom Classic -- as management now refers to it -- by Avago, to form the new Broadcom Limited.

Here's why I don't think this report is accurate.

An analyst actually asked about this on the last earnings callOn Broadcom's most-recent earnings call, one analyst actually asked management the following question about its Wi-Fi chip business:

Broadcom CEO Hock Tan gave a rather unambiguous response (emphasis mine):

It would appear from the above quote -- and in particular the bolded bits -- that Broadcom is not only interested in staying in the mobile Wi-Fi business, a business that was a significant portion of Broadcom Classic's total revenue, but that it expects to continue to develop leadership products for it.

Broadcom expects content increases in next generation tier-1 phones Samsung has generally used the latest Wi-Fi combo chips from Broadcom, and even Apple -- which had traditionally chosen to "hang back" a generation or two (probably for cost reasons) -- is now adopting fairly cutting-edge Wi-Fi chips.

"Classic Broadcom's combo Wi-Fi, Bluetooth, GPS, and custom analog solutions will further add significantly to our content in these tier-1 OEM-leading smartphones," Tan said. "By the same token, of course, we expect the classic Broadcom wireless products to also benefit from the launch of new generation of phones later this year."

It sure doesn't sound to me like Broadcom is planning to "phase out" this business. I call this rumor categorically false.

The article Why This Broadcom Ltd. Rumor Is Probably False originally appeared on Fool.com.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.