Chipmaker Broadcom Corp. (NASDAQ: BRCM) announced Monday morning that it has begun to explore “strategic options” for its cellular baseband business, including a possible sale or closure. The industry leader in baseband processors is Qualcomm Corp. (NASDAQ: QCOM), which commands more than 60% of the market.

At the same time, Broadcom also announced an update outlook for its fiscal second quarter. The company reaffirmed its previous revenue estimate of $2.0 billion to $2.1 billion and expects gross margins to be at or above the high end of its previous guidance. The company said in April it expected GAAP gross margins to rise 1% to 2% and adjusted gross margins to rise 0.75% to 1.75%.

Broadcom said that a sale or wind-down of the baseband business would reduce its annual R&D and SG&A expenses by $700 million, of which about $100 million is related to stock-based compensation. Translation: Broadcom expects to get rid of a lot of employees, either by selling the business or by firing them if a buyer cannot be found.

While Qualcomm leads the pack in providing baseband chips to the mobile device industry, Broadcom also trailed Taiwan’s MediaTek, Intel Corp. (NASDAQ: INTC) and Spreadtrum Communications Inc. (NASDAQ: SPRD) at the end of the 2013, according to a report from Strategy Analytics. Running last in a five-horse race is rarely (never?) a successful strategy.

In January Broadcom touted its system-on-a-chip technology aimed at the LTE market and said that Samsung was already using the chip in one of its phones. The competition in the baseband market has centered on 3G-compatible chips. It is not exactly clear from Broadcom’s announcement whether the LTE business is part of Broadcom’s exploration.

Broadcom shares were up about 14.2% in premarket trading, at $36.40 in a 52-week range of $23.25 to $36.20.

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