Nvidia said it is facing restructuring charges of $100 million to $125 million following its decision to wind-down Icera, its modem business, if it is unable to sell the unit.
Earlier this week the company said that it would shut the business by the second quarter of fiscal 2016, but that it is also “open to the sale of the technology or operations”.
Nvidia bought Icera in 2011 for $367 million, “to engage in the smartphone revolution with a leading integrated application processor and modem platform”.
But in the face of competition from companies such as Qualcomm and MediaTek (as well as in-house designs from Apple, Samsung and Huawei), it has subsequently “reshaped its strategy to focus on high-growth computing opportunities in gaming, automotive and cloud computing applications”.
Nvidia is not the only company to struggle in this space: Ericsson announced in September 2014 that it was axing its modems business, which had previously been spun-out into the failed ST-Ericsson joint venture.
And Intel has also spent big to bolster its position in the mobile business, as it came late to the market with a chip integrating application processor and modem, following its acquisition of the wireless business of Infineon in 2010.
Nvidia said that Icera’s 4G technology “meets the company’s needs for the next year or more”, after which it will partner with third-party suppliers.
“When the world moves to 5G, we hope that there are going to be, and our assessment is that there will be, multiple suppliers in the marketplace. And we’ll partner with them if it’s necessary. But our primary focus is going to be focusing on visual computing products,” Jen-Hsun Huang, president and CEO, said.
Icera’s modem business has around 500 staff, based primarily in the UK and France, with smaller presences in Asia and the United States.
On a group level, the company reported a Q1 profit of $134 million, down 2.2 per cent, on revenue of $1.15 billion, up 4.4 per cent.
Revenue growth was driven by Nvidia’s GeoForce GPUs for gaming, Tesla’s GPU for accelerated computing, and automotive infotainment systems. Profit was impacted by a higher effective tax rate and a gain on investment in the prior-year period.
The company also noted it has a US International Trade Commission case against Samsung and Qualcomm set to be heard in June. It said that last month it received a “favourable pretrial claim construction in the case”.