Broadcom buys femtocell system-on-a-chip company

Broadcom Corp. (BRCM), said it plans to acquire Percello Ltd., which develops system-on-a-chip femtocell solutions, for about $86 million, giving Broadcom a play in the small-cell sector, which is expected to see increased traction as wireless operators bring their networks closer to end users to better manage increased data consumption. Broadcom could pay an additional $12 million if certain performance targets are met.
“Percello’s energy-efficient and cost-optimized femtocell architecture augments our portfolio of highly integrated solutions for broadband connectivity and provides significant benefits for our customers and end users,” said Greg Fischer, VP and GM of Broadcom’s Broadband Carrier Access line of business. “As wireless data usage continues to expand, this technology is well-positioned to enable wireless carriers to offload both data and voice traffic, while offering subscribers better cell reception in the home and office and accelerating the introduction of new ‘converged’ mobile broadband services.”
Femtocells have received mixed reaction from the wireless industry, in part because some operators are letting their customers pay better voice coverage inside their homes, but are counting data consumption toward their monthly plans. Nevertheless, 4G deployments are expected to use a wide range of macrocellular and small-cell solutions that could include femtocells, picocells and Distributed Antenna System (DAS) deployments.
“The femtocell market has turned the corner in 2010 with more than 1 million femtocells global shipments expected by conservative estimates this year. By 2015 we see more than 50 million femtocells being shipped annually with WCDMA femtocells making up the bulk of the market,” said Aditya Kaul, Practice Director, Mobile Networks, ABI Research. “This is driven by the consumers’ desire to be connected at all times, the need for increased data capacity in networks coupled with wireless service providers deploying fast, simple and cost-effective upgrades to support base stations and accelerate the introduction of advanced services like presence and location based alerts, multimedia syncing and sharing, smart phone applications and enhanced mobile video services to their subscribers.”
The deal could close in the fourth quarter or first quarter.
Broadcom also posted third-quarter financials, with record net revenue of $1.8 billion, up 44% from a year ago. Net income stood at $327 million, down $1 million from the previous quarter but up tremendously from the $85 million posted in Q3 2009.
“Broadcom continues to execute exceptionally well with record revenue and earnings in the third quarter of 2010. I am particularly pleased that we had record sales in each of our segments and reached our GAAP product operating margin model of 15% to 17%. These achievements are due to solid growth in our wired and wireless communication businesses, powerfully engineered products and Broadcom’s continued commitment to financial discipline,” said Scott A. McGregor, Broadcom’s president and CEO. “Looking ahead, we believe that consumer demand for connectivity will continue to drive demand for our communication semiconductors, which should enable Broadcom to deliver solid revenue growth and sustained profitability in the fourth quarter.”