Bloomberg News

Broadcom Third-Quarter Sales Forecast Tops Some Estimates

July 25, 2012

Broadcom’s Third-Quarter Sales Forecast May Beat Some Estimates

Under Chief Executive Officer Scott McGregor, Broadcom Corp. is moving into the market for so-called baseband chips used to connect phones to 3G cellular networks, an area dominated by Qualcomm Inc. Photographer: Ronda Churchill/Bloomberg

Broadcom Corp. (BRCM:US), a maker of chips that help mobile devices connect to the Internet, forecast third-quarter sales that may exceed some analysts’ estimates, helped by strong demand from its smartphone customers.

Third-quarter revenue will be $2 billion to $2.15 billion, the Irvine, California-based company said yesterday in a statement. Analysts on average estimated (BRCM:US) sales of $2.11 billion, according to data compiled by Bloomberg.

Broadcom’s largest phone customers are Apple Inc. (AAPL:US) and Samsung Electronics Co., which combined control more than half of the smartphone market and have grown faster than competitors. Broadcom’s chips provide Wi-Fi and Bluetooth connections in the iPhone, iPad and Samsung’s Galaxy SIII handset.

“They’ve got the two leading customers and will benefit from any growth,” said Betsy Van Hees, an analyst at Wedbush Securities. “They are the safest derivative play to Apple.”

Broadcom rose 9.3 percent to $33.64 at 11:44 a.m. today in New York. The shares had gained 4.8 percent this year through yesterday.

Altera Corp. (ALTR:US), which -- like Broadcom -- is a supplier to the mobile phone industry, surged as much as 18 percent, its biggest one-day gain since (ALTR:US) 2004, after predicting higher sales yesterday.

Apple reported quarterly iPhone sales yesterday that fell short of the average prediction of analysts, according to data compiled by Bloomberg. Apple’s third-quarter profit and sales missed analysts’ projections for only the second time since 2003 as customers held off on iPhone purchases while waiting for a new model to be introduced later in the year.

IPhone Purchases

Second-quarter net income was $160 million, or 28 cents a share, compared with $175 million, or 31 cents, a year earlier, Broadcom said. Sales rose 9.7 percent to $1.97 billion. Excluding certain costs, profit was 72 cents a share.

Broadcom was estimated (BRCM:US) by analysts to have second-quarter profit before certain costs of 67 cents a share on sales of $1.95 billion.

Broadcom saw strength across all of its business groups, Chief Executive Officer Scott McGregor said on a conference call with analysts. While growth was limited by weaker demand in some regions, Broadcom is increasing market share by winning orders from rivals, he said

“We’ve been able to offset some of the macro headwind with the ability to take share,” McGregor said on the call.

Gross Margin

Demand for set-top box chips is growing as more consumers outside of the U.S. and Europe subscribe to digital television services, he said. Broadcom is also selling more chips for home networking as service providers offer higher-speed Internet access and more features in pricier routers and gateways.

In the current period, product gross (BRCM:US) margin, or the percentage of sales remaining after deducting the cost of production, will be “roughly flat” from the 52.2 percent the company reported for the second quarter. The second-quarter measure of profit was calculated excluding some items, and compares with analysts’ average prediction of 52.5 percent.

Under 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) Broadcom has won Samsung and Nokia Oyj (NOK1V) as customers for those chips.

Altera Surge

Altera, based in San Jose, California, yesterday predicted sales this quarter will increase 2 percent to 6 percent from the previous three months.

That indicates sales of between $474 million and $493 million and compares with an average analyst estimate of $470 million, according to data compiled by Bloomberg.

Altera CEO John Daane told analysts yesterday that the telecommunications and wireless business had lead his company’s gains in the second quarter.

Shares rose $4.21, or 14 percent, to $34.88 in New York trading. They had lost 17 percent this year.

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)
    • $39.38 USD
    • 0.18
    • 0.46%
  • AAPL
    (Apple Inc)
    • $102.5 USD
    • 0.25
    • 0.24%
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