Bloomberg News

Broadcom’s Sales Forecast Tops Some Analysts’ Estimates

May 01, 2012

Broadcom Corp. (BRCM:US), a maker of chips that help mobile devices connect to the Internet, forecast second- quarter sales that may exceed some analysts’ estimates, lifted by increasing orders from smartphone makers.

Second-quarter revenue will be $1.9 billion to $2 billion, the Irvine, California-based company said today in a statement. Analysts on average estimated (BRCM:US) sales of $1.92 billion, according to data compiled by Bloomberg.

Broadcom is benefiting from demand for radio chips that let smartphones and tablets connect over Wi-Fi and Bluetooth signals. Customer Apple Inc. said last week it sold 35.1 million iPhones in the period, more than analysts estimated. Broadcom’s sales this quarter will be helped by demand for Apple’s iPad and cheaper phones made by other customers such as Nokia Oyj, said Ruben Roy, an analyst at Mizuho Securities USA Inc.

“The iPad assumptions are a little better than people were thinking,” said New York-based Roy, who recommends buying Broadcom shares.

Broadcom climbed (BRCM:US) less than 1 percent to $36.71 at the close in New York. The shares have gained 25 percent this year. The stock slipped 1.4 percent in extended trading following the report. The company’s sales forecast lagged behind some analysts’ highest estimates, according to Doug Freedman, an analyst at RBC Capital Markets.

First Quarter

First-quarter net income fell to $88 million, or 15 cents a share, from $228 million, or 40 cents, a year earlier, the company said. Sales rose less than 1 percent to $1.83 billion. Excluding certain costs, profit was 65 cents.

Broadcom was estimated (BRCM:US) by analysts to have first-quarter profit before certain costs of 55 cents a share on sales of $1.78 billion.

Under Chief Executive Officer Scott McGregor, Broadcom is moving into the market for so-called baseband chips used to connect phones to 3G cellular networks, an area dominated by Qualcomm Inc. (QCOM:US) The two companies are increasingly moving onto each other’s turf as they try to make chips that combine communications and processing functions, enabling smaller and more powerful phones.

“Things are looking rosier for our 3G business,” McGregor told analysts on a conference call today. While the company won’t get orders it had expected from Nokia Oyj for those chips this year, Samsung Electronics Co. and new customers are boosting demand, he said. He declined to identify the new customers.

Unlike Qualcomm, which said last month it was struggling to get all of the parts it needs from manufacturing partners, Broadcom isn’t yet selling chips made on the latest production technology, and therefore hasn’t suffered any shortfall of its own, McGregor said.

Apple accounts for about 13 percent of Broadcom’s sales, according to a Bloomberg supply-chain (BRCM:US) analysis. Samsung is its second-largest customer, providing about 10 percent of revenue.

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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Companies Mentioned

  • BRCM
    (Broadcom Corp)
    • $30.41 USD
    • 0.38
    • 1.25%
  • QCOM
    (QUALCOMM Inc)
    • $80.71 USD
    • 0.10
    • 0.12%
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