Hello and welcome to the Broadcom's Q2 2013 Earnings Call. My name is Melissa and I will be your operator for today's call. (Operator instructions) Please note this conference is being recorded. I will now turn the call over to Chris Zegarelli, you may begin.

Thank you, Melissa, and good afternoon everyone. Today's call will include prepared remarks by Scott McGregor, our President and Chief Executive Officer; and Eric Brandt, our Executive Vice President and Chief Financial Officer. This call will include forward-looking statements which involve risks and uncertainties that could cause Broadcom's results to differ materially and adversely from management's current expectations. We encourage you to review the cautionary statements and risk factors contained in the earnings release, which was furnished with the SEC today and is available on our website and in our 2012 10-K. We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances. Additionally, throughout this call we will be discussing certain non-GAAP financial measures. Today's earnings release and the related current report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present a reconciliation between the two for the periods reported in the release. Please also see the Investors section of our website at www.broadcom.com/investors for a slide deck that includes additional information disclosed in accordance with SEC Regulation G. Now it is my pleasure to introduce Broadcom's President and Chief Executive Officer, Scott McGregor.

Good afternoon and thanks for joining us today. In the June quarter Broadcom delivered revenue of $2.09 billion, up roughly 6% year-over-year and consistent with the guided range provided in April. Product gross margin came in ahead of guidance due to strong sequential growth in our infrastructure business. Operating expenses came in at the low end of the guided range. This combination of in line revenues and solid financial discipline enabled us to deliver non-GAAP EPS of $0.70 which is $0.02 better than first call consensus. Broadcom continues to deliver innovative products across our addressable markets, home, hand and infrastructure. We are delivering next generation gateways and set top box solutions to reduce time to market and enable seamless broadband access and video distribution. Also delivering high density Ethernet switch, carrier grade platforms and multi-core processors in the service provider and data center networks. We are also seeing strength in new connectivity technologies including 5G Wi-Fi and NFC, and we are investing in emerging growth opportunities including the Internet of Things and wearables. I would now like to turn the call over to Eric for details on second quarter results and third quarter guidance.

Thanks, Scott. As Chris mentioned, please refer to the data breakout in the investors section of our website for additional information that will supplement my financial commentary. Moving to the financial overview. To summarize, total revenue of $2.09 billion including product revenue of $2.04 billion. Q2 total net revenue was up 4.2% sequentially and 6% year-over-year. Q2 non-GAAP product gross margin went down 20 basis points from Q1 to 51.8%. Q2 GAAP product gross margin was 49.4%. Non-GAAP R&D plus SG&A expenses were $3 million sequential while GAAP R&D plus SG&A expenses were down $1 million. Q2 non-GAAP EPS was $0.70 or $0.02 above first call consensus of $0.68 per share. Q2 GAAP loss per share was $0.43 which included $0.93 of acquisition related amortization and charges outlines in our earnings release. Cash flow from operations for Q2 was $334 million. Our cash and marketable securities balance at the end of the quarter was $4.2 billion. Moving to revenue and gross margin. In April we said we expect that Q2 total net revenue to be roughly $2.1 billion plus or minus 4%. We delivered revenue slightly below the midpoint of that range of $2.09 billion. Our broadband communications segment increased roughly 6% sequentially from Q1 to $568 million driven by growth in sales of both set top box platforms and broadband modem solutions. Revenue from our infrastructure and networking segment came in meaningfully ahead of expectations and increased 19% sequentially to $512 million, primarily driven by strength in Ethernet switches and PHYs. Our mobile and wireless segment decreased 3% sequentially to $967 million. Strength in NFC and 5G Wi-Fi were offset by softness in baseband. Our Q2 non-GAAP product gross margin came in ahead of expectations and was down 20 basis points from Q1 to 51.8%. Gross margin benefitted from…

Thanks, Eric. Starting with the home platform, our Broadband Communications revenue came in at $568 million, up roughly 6% sequentially and 5% year over year. We saw broad sequential broad in both set top box and broadband modems. Operating margins were also very strong in this business, coming in above 24% in the quarter. We continue to see strength in our set top boxes in emerging markets, driven by both subscriber growth and share gains with local key operators. Satellite subscribers are estimated to grow 7% per year to over $300 million by 2017, mostly driven by emerging markets. Our share gains can be seen in Dish TV India selecting our SSP for upcoming satellite set top box deployments as well as Tata Sky selecting our MPEG-4 standard definition set top box solutions. In developed markets, we see strength in the adoption of advanced features and technologies. We note strong operator interest in HEVC which is the next generation video compression standard that roughly doubles the capacity of existing networks to deliver an expanding array of content to consumers. Broadcom is leading the industry to HEVC and we believe this transition starts a multiyear upgrade cycle that will contribute to growth in our set top box business. Our mix of MoCA 2.0 enabled boxes also more than doubled sequentially in the June quarter as more of our customers migrate to our latest generation set top box platforms. We also see design win momentum in our broadband access business. PON design activity has been strong and set the stage for share gains going forward. PON is the fastest growing segment in the broadband access market with subscriber growth expected upwards of 20% through 2016. We also see solid design momentum in LTE and next generation 3G small cells and femtocell. This…

(Operator Instructions) Our first question is from Vivek Arya with Bank of America Merrill Lynch. Please go ahead with your question. Vivek Arya – Bank of America Merrill Lynch: Scott, first of all, what do you expect your connectivity combo share to be over the next few quarters? As you’re seeing, there is a lot of pressure on your stock related to speculation around share losses to Qualcomm and others. So would appreciate it if you could address that.

I’ve read some of those reports and frankly I disagree with them. We see our connectivity share for example on LTE running about three quarters of all handsets out there. When we look at our share going forward, we see it as stable. When many of those reports that are out there point out models we’ve lost, but they don’t point out all the models we’ve won. And so we do see share and good shape going forward the rest of this year. Certainly driving that is the increased adoption of 5G Wi-Fi. We’ve got excellent strength there. Our NFC products and technology are doing extremely well. In general, our connectivity products are diverse and well adapted for customers. And so we’re continuing to see strong design win traction there and we believe our share is doing just fine. Vivek Arya – Bank of America Merrill Lynch: And as a follow up maybe for Eric, if you could address the operating margins in the mobile and the infrastructure segments. On the mobile side they were just under 10% and I was wondering if that was just the lower sales volumes, because I would have expected better connectivity and lower cellular to perhaps help on the margin front. And then on the infrastructure side where you saw very strong growth, but the margins around 30% are good, but are somewhat below the mid-30s you had at somewhat lower revenues a year or two ago. So if you could just help us understand puts and takes on the operating margin side. Thank you.

Sure. On both of those I would say that the gross margins are relatively stable inside of those businesses. There are some puts and takes moving around. So they’re principally driven by the movements in revenue. So mobile and wireless principally driven by the movement in revenue and some increased costs on their part as they are our focus point for investment. And on the infrastructure side, relatively tight cost management stable gross margins and just the effect of adding the revenue to those numbers.

Our next question is from Harlan Sur with JPMorgan. Please go ahead with your question. Harlan Sur – JPMorgan: Looking at the June quarter, obviously wireless underperformed your expectations. I think your connectivity business grew but your 3G baseband business seems to have been weaker than anticipated. Was this more demand related? Was it inventory related? Was it share shift? And then given your 3G pipeline single core, duo core, quad core, do you think this business starts to reaccelerate in Q3 and through the second half of this year?

Thanks Harlan. In terms of our 3G business, it was soft. We don’t have too many customers right now in that business. We have one larger than others. I can’t break out specific customers, but I believe it’s a combination of demand falling a bit and possibly some inventory from Q1. We’ll need to see how that develops. But there could be a bit of inventory that we built in Q1 and that was the reason for softness in Q2. In terms of going forward, we’re pretty excited about the quad core we introduced recently. We’re on track to ship that in the third quarter and we have multiple customers looking at using that product right now. So that’s going fairly well. In terms of overall pick up on demand, we’ll have to wait and see how some of the models ship. But we’ll see how that plays out in the third quarter. But we are in more models than we have been in the last couple of quarters. Of course you have to be in the high volume models for that to really matter. But certainly the number of models is picking up for us going into the second half of the year. Harlan Sur – JPMorgan: And then on the guidance for your broadband segment, Q3 is typically the seasonally strongest quarter for this segment. You’ve got guys like Comcast pushing hard on their new X1 platform and I think in Q4 they start to roll out their next-gen X2 platform. As you mentioned about that access trends seem to be constructive. Emerging market trends seem to be constructive. So any color to help us understand sort of the flattish outlook for Q3?

It's a fair question and we look at that as well. We did call it as flattish. We are seeing though that we are taking share. So when we look at some of the peer reports that have been out over the last few days, we see them declining in the same -- in quarter's that you point out would normally be increasing. So I think that the spend is just not out there. I do see us taking share. I think if the spend were moving at a faster rate, you would see us grow at a faster rate. But we are still growing faster than the peer set there.

And Harlan, I would just also comment that if you look historically Q2 has tended to be the stronger growth quarter sequentially for broadband versus Q3 and we have (inaudible) pretty good sequential growth in Q2 for broadband.

Thank you. Our next question is Joe Moore with Morgan Stanley. Please go ahead with your question.

If I try and get your guidance for mobile and wireless I get you are kind of up 6% or so year-over-year for the first three quarters and I would have thought with some of the baseband wins that you had that it would be higher now. I mean can you talk about how that growth kind of does split between some of the newer baseband customers versus the existing combo business?

The combo business has been strong and so the softness is in our baseband business. Also to some extent in our GPS businesses, some of the PND devices phase out in favor of people using their phones. So in terms of why is this, I think, as I mentioned to Harlan earlier, it could be a little bit of inventory but a demand issue from our customers, but I couldn't speculate based on that exactly the nature of that.

Okay. And then in terms of the reports of a couple of lost sockets. You said you disagree with the (inaudible) there clearly was a couple of sockets that were lost. I mean, is there something different with that competitor, with Qualcomm? Are they more competitive than you've seen them in the past or is this just kind of a second source activity that you had expected to kick in at some point?

Well, let me be real clear on this. I mean we see that we are in about three quarters of LTE handsets. We are not in 100%, we are in a about three quarters. And so we are not going to get every single design and I think a lot of customers do want to have some diversity in their supply. So they may choose an inferior part sometimes just to keep some diversity in the supply chain. We are not seeing anything particularly new or unusual. It's a competitive market, don't get me wrong, and we have competitors out there and they fight hard for these parts. But again, a lot of these reports have made a big deal of the ones we don't win but they fail to point out the ones that used to be our competitor that we are winning. And so we are gaining share in some of the customers other than the one that some of those reports have pointed out. So I believe share looks good this year. I don't see any share loss of any proportion here. I think it looks stable and in fact we've got great technologies. And I would encourage folks do a little research on share that we are gaining at other customers that offsets maybe a model or two we loose with the customer they highlighted. So again, we are not going to get 100%, you will always be able to find some models we don't win. But you need to look at the total set and we believe we've got a pretty complete database of every handset model we are aware of in the industry and where we stand in each one of those, and we believe we're good.

Thank you. Our next question is Jim Schneider with Goldman Sachs. Please go ahead.

I was wondering if you could provide a little bit more color on your expectations for Q3 in the wireless business in terms of what you expect from the baseband business. Do you expect any recovery there or is it all going to be driven by growth in combos for Q3?

I think the primary growth driver for us in to Q3 is going to be the connectivity business and again strong share and no sign of share loss there. I think that will be the primary driver for growth in that business and we'll have to see how the rest of the quarter comes out. It's a little hard to tell exactly how fast some models will sell and so we have less visibility on some of the baseband stuff. The connectivity stuff looks solid and we're calling that as the primary driver.

That's helpful. And then as the follow up, just asking another question on the baseband. In the second half of this year relative to the first half of this year, what's your expectation about how many customer smartphones launch with your baseband silicon in it? Kind of on a relative basis more in the second half or was it more in the first half?

We'll certainly have more customer diversity in the second half. We've been doing a good job I think in our Chinese business. Our reference design there and our turnkey designs have gotten good traction and so we're picking up a lot of customers. A lot of those tend to be smaller customers though, not as large as certainly our largest one. But we probably tripled the number of customers we have in China. And I believe you're going to see us pick-up some share at some of the other top 10 vendors as we go forward here and as we roll out things like a competitive quad core coming out. So I think our customer diversity will improve. I think we'll be in more models. And then it’s just a question of how many of each of those models sell and that really drives the overall volume.

Thank you. Our next question is Glen Yeung with Citigroup. Please go ahead. Glen, your line is now open. If you are muted, please unmute. We’ll go ahead to the next question. Next question is Srini Pajjuri with CLSA. Please go ahead with your question. Srini Pajjuri – CLSA: Scott, if I look at your outlook for third quarter for wireless, you said it’s going to be up slightly. But for the last three years you’ve had double digit sequential growth. I’m just wondering where the disconnect is this year.

In fact, if you look at last year, we had really substantial growth in the third quarter. We certainly see the industry being a bit softer this year overall and I think that probably coloring in a little bit. But we’re calling it like we see it and if it turns out to be more than that, great. But we’re calling it like we see it right now. Srini Pajjuri – CLSA: And then there’s also some concerns given that TI said yesterday that they sold their wireless connectivity business to one of the smartphone customers. So I’m just wondering to what extent in a vertical integration by your customers you think is going to impact your growth going forward.

Yeah, I saw that as well and I believe a lot of those employees went to other jobs and other things a number of quarters ago. So this isn’t particularly new news. It could be that some IT was sold or patents or something like that and that may be the basis for this deal. To the extent that customers have looked at vertical integration plays, we’ve seen this happen over and over again and generally it doesn’t work out very well. We saw this happen with another of our large customers buying one of our sales competitors of their business and they still after multiple years have yet to ship a product from it. I think if you look at the TI business that they sold, it was in pretty bad shape and they even got kicked out of their last partner there towards the end. The business was basically non-competitive. So my guess is if you were able to pick up a groove and reassemble it and get it going again, you’re years away from having a product that would be competitive with ours. So I don’t see that as a factor certainly for the next few years, if at all.

Our next question is from Timothy Arcuri with Cowen & Company. Please go ahead. Timothy Arcuri – Cowen & Company: Two things. First of all, Scott, can you give us some sense just to follow on that point. Can you give us a sense of how much you’re spending on development in the connectivity business to just give us a sense of the sheer might you’re putting into that and how a customer -- how much money a customer might have to invest to replicate what you have.

We’re spending the better part of $1 billion in R&D in that space and so -- on overall wireless space. So I think that’s going to be very tough if you’ve got a handful of engineers to go compete there. But we have we believe the largest R&D team in the industry on that. We have the largest business there and it’s got a lot of different kinds of connectivity chips. And we see this happen often where somebody will try to create a connectivity chip. And I think that really misses it because what our customers like about Broadcom is that we have a whole family of connectivity chips that all mix and match. You can have a whole variety of SKUs. They’re all software compatible and it’s very hard with a connectivity chip because you can only target a small number of the SKUs. I think just in terms of the wireless connectivity business alone, we spend over $400 million in R&D per year. So again that’s not going to be an easy business to pick off.

Our next question is from Stacy Rasgon with Sanford Bernstein. Please go ahead. Stacy Rasgon – Sanford C. Bernstein: First I wanted to drill into the baseband downside this quarter. If you could just walk me through this. I think you had said last quarter Samsung was finally running around $100 million quarter run rate. They’re obviously your biggest customer, the bulk of the business. This quarter your total wireless fell by about $30 million. Connectivity was up which means that your baseband -- 3G baseband must have fallen by more than $30 million. And you're probably guiding, I don't know, $100 million to $200 million below where certainly expectations were. But it would seem that a material amount of that 3G baseband business actually fell off this quarter. I guess can you -- is that math acutely correct? Can you give us some feeling for how much of the baseband business actually vanished this quarter? And do you think it really could have all been just channel and demand or is there something else going on there?

I can't give you quite all the details you’re looking for, but let me try to help. It was a surprise to us too. We did guide our wireless business to be up in the quarter and instead it was down about 3%. And so that was a bit surprising to us. And again demand in the baseband business was a factor. But I mean it wasn't the only factor there are other significant factors in that number as well including a decline in GPS and some of the other minor product lines within the wireless business outside of connectivity. So I would say some of that was baseband, some of it was these other pieces. So we don't put all of it on the baseband, but baseband was one of the larger pieces but not more than half of that. So hopefully that helps a little bit in terms of the overall picture.

Thank you. Our next question is Ross Seymore with Deutsche Bank. Please go ahead with your question.

Just want to dig a little bit into the infrastructure and networking side of things, that's up 19% guide and even looking forward. I know you said it was the switch in the PHY side of things. How much of that do you think is company specific, how much of it is market share gains as Trident is starting to ramp, and is there a risk that some of it was actually inventory build?

I don't think any of it was inventory build in the ramp going forward. And the reason that we are a little cautious going forward is, we just want to make sure that we don't have an inventory build situation. Trident II is an incredibly popular chip. I think pretty much every single customer has slotted that chip into their product family. So very, very strong ramp there. And as we ramp into that, I think customers are trying to get as many of those devices as they can. And again, we are trying to be a little conservative on our guide there, just because we could see some attempted inventory build and we don't want to have that be a factor. But I think that is a very, very strong driver in datacenter. We are seeing also some service provider build outs. Finally some of these tenders are coming through. I note that one of the U.S. carriers announced that their CapEx is just fine and increasing. And we're seeing now some of the tenders happen in China, which can be substantial. Now those were expected, but they are beginning to happen and I think that's driving it too. So it's not like one or two customers it's broad-based and we're seeing some pickup there. And those are good margin products for us.

Thank you. Our next question is Patrick Wang with Evercore. Please go ahead with your question.

Hey, Eric, I was hoping you could talk to the inventory. It looks like inventory is up a little bit last quarter. Can you help us understand what happened and how you feel about inventory going forward?

Sure. Actually inventory is up about $90 million, about half of that is a spot purchase that we did. So to the extent that we can use our balance sheet to buy inventory which raises our gross margin, we'll do that. And so if you would have backed that out we would probably be up 45 or 50 basis points, in terms of turns in north of 7 which would be about where we expect it to be. But given that we have this opportunity to improve the gross margins and do a spot purchase, we took advantage of it.

Our next question is Kevin Cassidy with Stifel. Please go ahead with your question

Going back to the infrastructure, can you talk what your product mix is as far as the speed goes in Ethernet?

Let's see, I don't have those handy. Chris, you have those, we can maybe put out there. Hold on one second.

The larger piece is on the 1 gig size, the 10 gig has been the fastest grower for us.

We'll try to get some numbers later in the call and come back to you on that. But we don't have those at our fingertips.

Thank you. Our next question is Ruben Roy with Mizuho Securities. Please go ahead.

Scott, I was wondering if you could give us a little more detail around the commentary on the carrier certification, particularly as it relates to where you are with LTE. And if you can give us anymore of an update on what you're hearing from your customers on those products and when you might start thinking about revenue? Thank you.

Carrier certification is going well. We're in, for example, AT&T ADAPT and we expect to conclude that certification by the end of the year. We're looking at other carriers as well and getting good feedback from customers. The product that's in the hands of customers is going well and we're feeling good about that. In terms of revenue, we have said that we see revenue in 2014. But I would say that we probably won't have a material amount of revenue in the first half of 2014. It's more a later 2014 event for us. And so probably don't assume any material revenue in the first half.

Our next question is Doug Freedman with RBC Capital Markets. Please go ahead. Doug Freedman – RBC Capital Markets: Scott, can you just expand a little bit on -- it sounds to me like you're pushing out the expectation there on the LTE ramp up. Is there some change in your expectations for the adoption curve?

No. We've said 2014 all along. So that’s no change. I think we just wanted to clarify and help you in your models that we don't see a material revenue event in the first half. Operator Thank you our next question is Craig Ellis with B. Riley. Please go ahead. Craig Ellis – B. Riley: That's Craig Ellis. Scott, can you just talk about baseband. Do you think with an expanded portfolio now including quad-core -- I know you don't expect it to grow necessarily in the third quarter, but can you get it back to sustainable growth without LTE as you look ahead at the design win pipelines you've got?

I think it's going to -- the quad-core is definitely going to help. It makes us have a more competitive portfolio overall and we’ll certainly pick up some wins there and maybe some new customers as well. In terms of really driving significant growth, I don't think it’s going to do that. I think we need LTE to really drive significant growth going forward and to have strong products ramping there. I think that's what's going to drive the real growth.

Our next question is from Sumit Dhanda with ISI Group. Please go ahead. Sumit, your line is now open. If you are muted, please unmute. We'll go ahead to the next question. Next question is Steven Chen with UBS. Please go ahead with your question. Steven Chen – UBS: Just had one major one on the wireless business. Was wondering if you could provide a little color on the directionality of order trends between your connectivity and [cellular] SoCs just on your forward-looking rolling forecast perspective. Has that momentum bottomed out and is it increasing now or for both the cellular SoC as well as the connectivity side?

We only guide one quarter ahead. And so in the current quarter which is our guide, we've said that the wireless business will be up. And we believe that probably the strength will be stronger on the connectivity side than on the baseband side. So that's the color we're able to get today.

Hi. This is Chris. I wanted to go back to give a little more color on the infrastructure revenue trend, especially by port speed. As we commented, we saw strength across all major segments sequentially into Q2 across service provider datacenter and enterprise as well. And as I was alluding to earlier, we saw growth across both 1 gig and 10 gig sequentially in Q2, 10 gig primarily in datacenter, DIGI primarily on the enterprise side. From a revenue perspective, DIGI is still the largest segment, but the highest percentage growth that we see is more in the 10 gig size. And looking forward we see that continuing especially with the ramp with Trident-2 in the second half.

And I just want to come back to just the points that you asked just generally on seasonality. Generally the company's seasonality in a normal year, and again in the normal year is typically a growth year for comps at around 9% or 10%. I think people are projecting somewhere around 2, is down mid-single-digits in Q1, up high singles in Q3 to low double and then down usually mid singles in Q4, low mid singles in Q4. And given that wireless is about half of our business, it tends to follow that pattern, perhaps a little bit more exaggerated. So hard to say with a lower growth year exactly how that's going to play out, but I suspect the hump of the year looks -- normally looks over the last five or 10 years.

Our next question is Michael McConnell with Pacific Crest Securities. Please go ahead with your question Michael McConnell – Pacific Crest Securities: Looking at the ramp this year of 802.11ac, I believe in December you have talk about 50% crossover expected at that point over the next 12 to 14 months. Given some of the less than expected sales at the high-end of the market, for the smartphone market, do you believe that will slow down the penetration of AC in the overall market, if we start to see growth kind of move from the high end to the mainstream. Maybe less AC but more in this year in terms of the overall handset market?

I think the trend towards AC is definitely still there. It's becoming more of a mandatory thing to have in certainly a high-end product today. And I think it's moving towards something you want to see in the mid-range going forward. So I think the penetration rates of AC are pretty much intact, plus or minus few months.

Thank you. Our next question is David Wong with Wells Fargo. Please go ahead with your question.

For the 4G baseband chips are you working closely with several potential customers or are you focusing on one or two major ones in the first instance?

Well we are certainly engaged right now and having discussions with more than two customers right now. We're involved with a number of customers. And we'll have to see how rapidly they can ship and how rapidly they deploy how many models we get. So that's still up in the air a little bit but we are definitely engaged with multiple customers and not just focused on one.

Thank you. Our next question is Chris Rolland with FBR. Please go ahead with your question.

On the switching side of your business, would you guys say that this would actually be sort of an inflection point and sort of white box switching? And do you think we've sort of moved beyond just a handful of hyper scale guys and perhaps moving into carriers, or is it just sort of just sticking with these cloud guys. And then also on Trident II when that hits the market, what do you think that ramp is going to look like? Is there some built up demand there. Thanks?

I think there is definitely built up demand on Trident II. We had a number of customers who basically had boxes ready to go, as soon as they can get the chips to put them out there. So, definitely pent up demand on Trident II. And in terms of your other question in terms of the penetration of all these products, yeah, I think you're going to see penetration definitely be on the data center and moving into the other areas. And certainly our intention to expand our product portfolio, not just switches but also network processors to help with that.

Thank you. Our next question is Anil Doradla with William Blair. Please go ahead.

You guys talked about the $500 million plus in impairment on NetLogic. Can you give us some color, Scott, around what's going on with that business? You talked about maybe a little bit weakness, was that driven by multi-core processors or was it the TCAMs, KBPs?

So it was across the business. And again let me sort of just explain it at a high level and let me let Eric explain sort of how the impairment works and why that got triggered. For us, since we acquired NetLogic, the service provider business in particular has come down significantly over two to four quarters. And the impairment is a fairly mechanical process that does a ten-year calculation of what became a lower base. And so you have this sort of irony that we're showing that the infrastructure segment is picking up significantly at the same time we take this impairment. And you would say, well, how could that happen, what's the logic behind that? So let me turn it over to Eric a little bit to explain sort of how does the impairment work and what mechanically made that happen.

So if you look, from the time we did the acquisition to today, as you know the market has come down. And so if we look at 2013 in terms of what we had in the forecast and we actually did purchase intangibles and sort of where we are two quarters into 2013, that came down about 20% to 25%. If you hold relatively stable growth rates from your original set of assumptions because it wouldn't be reasonable to ratchet your growth rates up to hold your original revenue numbers over the next seven years or ten years really is how you do the modeling. Then what you do because of the miracle of compounding is that 20% to 25% begins to look like 30% or 40%, just because of a compounding effect. That then crosses the line that triggers the impairment and goes from an undiscounted cash flow basis to a discounted cash flow basis, and that's what drives the impairment through and it was about $461 million on NetLogic. Having said that, I think we still believe that the growth rates of the business are relatively consistent to what we thought they would be. It's just that the base year of 2013 has turned out to be lower than we thought.

But as a follow up, Scott, can you talk about the competitive dynamics there? How is NetLogic the core business doing from a share point of view and market share point of view?

The NetLogic business is doing fine from a share point of view. It's doing great and all the strategic reasons to do the acquisition are intact. The challenge we have is the market has come down, triggering the impairment. So it is consistent to have strong share and growth in that business and an impairment at the same time for the reasons that Eric said because of the lower base coming down over the last year then cascaded over 10 years forward. So all of the logical reasons why we did that acquisition are intact. This new (inaudible) product, the 20 core, 80 thread processor is incredible. That's a great product. They’ve been working on that for a while and that's a very significant deployment since the group in the market in the KBP which is the largest piece of the NetLogic revenues. Share is holding up well. There is one small competitor coming into that market but really hasn't gotten much traction. And the other competitor in that space is exiting the business. And so share probably goes up there over the next year. So, all that's in pretty good shape from a share point of view. It’s just it’s a lower base and that's we’re struggling with. And yes that's disappointing, but that's what we have and we think we're doing really well with that going forward.

Our next question is Romit Shah with Nomura. Please go ahead. Romit your line is now open. If you're on mute, please unmute. We'll go ahead to the next question. Next question is Ambrish Srivastava with BMO. Please go ahead with your question.

This is Steve (inaudible) dialing in for Ambrish. Just a quick one, on the 5G Wi-Fi you mentioned that revenue is up 50% quarter-over-quarter. Just wondering what is the driver. Is it from the handset side or is it from the router and the switches or the AT?

In the wireless space it's definitely from the handset side. That's the largest driver of that business. It's a combination of strong products and higher penetration of all the technologies. And as I've said earlier, we’ve got really great products in that space and we’re doing well and we expect to see that share definitely carry forward for us.

We have no further questions at this time. I would like to hand it back to Mr. McGregor for closing remarks.

I’d like to thank everyone for joining us today. We are excited about the multiple growth opportunities that lie ahead, many that we've mentioned. Our team is very focused on delivering our LTE advance modem. We talked about that a bit is an important growth driver for smartphones and for tablets in 2014. We believe we're developing a number of disruptive connectivity solutions that are going to power the nascent market for wearables and the internet of things. That's a big market yet to come. We're just starting the production ramp of our Trident-2 platform for top of rack switch, very much in demand product right now. And we continue to see good growth in the data center market. In broadband, we’re setting the stage for the industry transition to HEVC next year and ultra HD in the years that follow. We think all of these are great trends that will drive growth for us here at Broadcom. Thank you very much again for joining us and have a good day.

Ladies and gentlemen, this concludes the Broadcom Q2 2013 earnings call. Thank you all for attending. You may now disconnect.