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Freescale and Broadcom continue wave of bad news for chipmakers

By CAROLINE GABRIEL

Published: 30 January, 2009

READ MORE: Semiconductor

Following weak quarters from Texas Instruments and Qualcomm, there is further bad news from the mobile chip market, with Freescale and Broadcom reporting major losses. Like TI, which this week cancelled its sale of its merchant baseband processor business, having failed to attract the price it needed, Freescale has also taken its wireless IC unit off the table, and will now look to sell these activities piecemeal.

Freescale, the former chip unit of Motorola and now privately held, lost nearly $8bn in full year 2008, with a loss of $4.03bn in the fourth quarter, far wider than a $525m deficit the year before. The operating loss included non-cash charges related to an impairment to goodwill and intangible assets totaling $3.6bn. Sales were down to $940m, from $1.5bn year-on-year and $1.4bn in Q3. The full year loss was $7.94bn, compared to $1.61bn in 2007.

''The challenging economic climate significantly impacted our fourth quarter results,'' said CEO Rich Beyer, in a statement. ''Despite the current climate, our priorities are clear and achievable."

Freescale said it was considering other options for exiting the wireless handset chip business after failing to find a buyer for the division and may now sell off individual pieces of the unit.

"Circumstances are very difficult for any kind of significant acquisitions at the moment while companies are weighing how far down the market is going to go," Beyer said. Sales in the cellular IC division fell sharply in Q4 from $303m a year earlier, to $64m.

Meanwhile, Broadcom reported a $159.2m loss in its fourth quarter, depressed by a $31.5m charge connected to acquisition of AMD's digital TV chip business; and by a $169.4m impairment charge for a write-down in the value of its mobile platforms group. The latter gives out some negative signals for Broadcom's dear wish to get into the cellphone chip business in a big way - it currently has tiny market share, but does have a deal with Nokia for EDGE chips, though it is not yet clear how much this will contribute in volume terms. The company is also strong in handset Wi-Fi.

Its sales outdid analyst forecasts, up 10% to $1.13bn (Wall Street had expected $1.07bn). But its guidance for its current first quarter disappointed analysts - Broadcom is predicting $800m to $875m, while pundits had hoped for $953m.

For the full year, the company saw profits up marginally from $213.3m to $214.8m, on sales up 23% to $4.66bn. It said it would freeze salaries and cut 3% of its workforce, or 200 employees - small fry compared to Intel's 6,000 or TI's 3,400, though Qualcomm is still managing to avoid any major layoffs.