SAN FRANCISCO—Broadcom Corp. President and CEO Scott McGregor Tuesday (July 24) downplayed speculation that Samsung Electronics Co. Ltd.'s acquisition of CSR plc's mobile business posed a threat to the company's business following Broadcom's better-than-expected second quarter financial report.
Samsung last week
agreed to pay $310 million for CSR's handset connectivity and location operations and the associated technology. Analysts have speculated that Samsung now has the technology to design its own connectivity chips for use in its handsets, presumably a blow to Broadcom, a major supplier to Samsung. Shares of Broadcom traded lower following the news last week.
"In the short to medium term, I don't it'll affect our business at all," McGregor said. Longer term, McGregor said, the impact will depend on whether Samsung can turn the CSR business into something that can compete with Broadcom.
McGregor described the 310 employees transferred from CSR to Samsung as part of the deal as a "fairly small number of employees" and said CSR's connectivity technology is not particularly advanced. He said CSR never had any success creating combo chips that combine Wi-Fi capability with other connectivity technologies.
"I think we've demonstrated over the last five years that doing good, well-integrated, technically performing combo products is harder than it seems," McGregor said. "And so, if we continue to innovate and keep doing good products, I don't expect it will affect us in the long term."
McGregor said he doesn't expect the CSR technology to be a technical threat to Broadcom's technology. He said Samsung is more likely to use resulting chips for lower-end products, which could impact some of Samsung's suppliers in Taiwan. I don't see it as a threat in the prime smartphone business or in most of the businesses" where Broadcom supplies Samsung, McGregor said.
Broadcom reported second quarter sales that exceeded analysts' expectations and came in at the high end of the company's own sales target. The company said it expects to eclipse $2 billion in sales in the third quarter for the first time.
McGregor reported that Broadcom is seeing some demand weakness in Europe, as well as some pockets of weakness in Asia. But the company expects sales to improve slightly on a sequential basis in the third quarter in its Infrastructure and Networking segment and to improve significantly in its Wireless and Connectivity segment. McGregor said Broadcom continues to believe it is gaining market share in several markets where it competes, offsetting negative macroeconomic impacts that have impact on the guidance of other chip companies.
"What's different for us is, we do believe we are taking share, so we think we've been able to offset some of the marco headwind with the ability to take share in a number of our markets," McGregor said.
Next: Q2 sales, profit and Q3 guidance
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