Bloomberg News

Broadcom Gains Most Since July After Forecast: Los Angeles Mover

February 01, 2012

Feb. 1 (Bloomberg) -- Broadcom Corp., a maker of chips that help mobile devices connect to the Internet, rose the most in six months after forecasting first-quarter sales that may exceed analysts’ estimates.

Broadcom, based in Irvine, California, advanced 8.1 percent to $37.13 at 12:09 p.m. in New York after rising as much as 8.5 percent for the biggest intraday gain since July 26. The stock fell 33 percent in 2011.

The company is benefiting from demand for radio chips that help Apple Inc.’s smartphones and tablets connect over Wi-Fi and Bluetooth signals. Apple’s phone sales more than doubled to 37 million in the fourth quarter. Broadcom’s forecast allayed concerns that weaker mobile-phone shipments in the first quarter would drag down chip orders, said Daniel Amir, an analyst at Lazard Capital Markets in San Francisco.

“This is definitely a positive surprise,” said Amir, who recommends buying the shares. “It’s possible that their share gains are leading to them outgrowing the industry.”

First-quarter revenue will be $1.7 billion to $1.8 billion, Broadcom said yesterday in a statement. Analysts on average had estimated $1.73 billion, data compiled by Bloomberg showed. In another statement yesterday, Broadcom said it increased its quarterly dividend by 11 percent to 10 cents a share.

Fourth-quarter net income fell to $254 million, or 45 cents a share, from $266 million, or 47 cents, a year earlier, the company said. Sales declined 6.4 percent to $1.82 billion. Excluding certain costs, profit was 68 cents.

Broadcom was estimated to have fourth-quarter profit before costs of 65 cents a share on sales of $1.8 billion, the average analysts’ estimates in a Bloomberg survey.

3-G Chips

While demand for older, so-called 2G mobile-phone chips is declining, the company expects to gain market share with 3G wireless products and combination chips that only Broadcom can make, Chief Executive Officer Scott McGregor said on a call with analysts.

“We know of no other competitor who can say they’re best in class for all of these components,” he said. “There’s an opportunity for us to increase share in combo chips this year.”

Apple accounted for 16 percent of Broadcom’s sales in 2011, the estimate of Uche Orji, an analyst at UBS AG in New York. Apple uses a Broadcom chip to supply Wi-Fi, Bluetooth and other radio connections.

Product gross margin, the percentage of sales remaining after deducting the cost of production, will be “roughly flat” in the current quarter compared with the 49.3 percent reported in the fourth quarter, the company said.

--Editors: Rob Golum, Jeffrey Tannenbaum

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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