2nd UPDATE: Broadcom 2Q Net Down On Lower Revenue; Shares Fall
July 23 2009 - 6:02PM
Dow Jones News
Broadcom Corp.'s (BRCM) second-quarter profit plunged 90% as the
company Thursday posted a double-digit revenue decline, but the
company signaled that business conditions are returning to
normal.
Broadcom also offered third-quarter revenue guidance above Wall
Street expectations, predicting net revenue of $1.12 billion to
$1.19 billion. Analysts expected $1.02 billion. Broadcom expects
gross margin to expand 1.25 percentage points from the second
quarter.
"Based upon the customer activity we've experienced today, we
expect the revenue momentum we experienced in the second-quarter to
continue into the third quarter," said Broadcom Chief Executive
Scott McGregor in a conference call to discuss the results.
He predicted future revenue growth could be broad-based, though
slightly stronger in the mobile and wireless segments.
However, Chief Financial Officer Eric Brandt added that it is
"way too early" to make any projections concerning the fourth
quarter. He said it is tough to determine whether the recovery in
the chip market will be "v"-shaped - meaning the worst is now over
- or "w"-shaped - meaning another drop is ahead - and so the
company will remain cautious.
The company's outlook mimics those from several other chip
makers, indicating that the technology market is stabilizing after
months of depressed spending on tech products.
"It's consistent - consistent with what we've heard out of
others," said Cody Acree, a Stifel Nicolaus analyst. "The
overarching theme is that orders are improving."
Broadcom's shares fell 4.9% to $27.75 in after-hours trading.
The stock, however, has more than doubled from a six-year low in
October 2008.
Broadcom reported profit of $13.4 million, or 3 cents a share,
down from $134.8 million, or 25 cents a share, a year earlier.
The results included a gain of $65.3 million from its settlement
last quarter of long-running patent lawsuits with Qualcomm Inc.
(QCOM). Also included were $50 million in charitable contributions
to establish the Broadcom Foundation and $11.3 million in
write-downs of long-lived assets. While the communications-chip
maker's earnings fell below Wall Street's expectations according to
Thomson Reuters, the consensus numbers aren't necessarily
comparable, as some analysts have included the Qualcomm settlement
in their estimates.
Analysts' latest estimates, which typically would exclude
certain non-recurring items, were for per-share earnings of 24
cents.
Revenue dropped 13% to $1.04 billion. As part of its Qualcomm
settlement, Broadcom recorded $67.3 million in licensing revenue.
Prior-year results included $35.6 million in royalties from a
patent agreement.
Analysts expected revenue of $984.4 million.
McGregor said the results "reflected a return to a more stable
ordering pattern and the ramp of new products from our end
customers."
Broadcom specializes in low-cost, high-speed "system-on-a-chip"
semiconductors and software that combine voice, video data and
multimedia applications. It posted an unexpected loss for the first
quarter but said customer bookings strengthened. The company's
wireless business is expected to expand since it settled the patent
suits with Qualcomm.
Gross margin fell to 46.3% from 52.3%, slightly below Broadcom's
April forecast of 46.5%.
Earlier this month, Broadcom dropped its bid to buy smaller chip
maker Emulex Corp. (ELX), after that company rejected a sweetened
offer valued at $912 million.
-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357;
Kathy.Shwiff@dowjones.com
(Jerry A. DiColo contributed to this report.)