Broadcom Corp. (BRCM:US), a maker of chips that help mobile devices connect to the Internet, reported third-quarter sales that beat analysts’ estimates, amid increased orders from smartphone manufacturers.
Net income was $220 million, or 38 cents a share, from $270 million, or 48 cents, a year earlier, the Irvine, California- based company said today in a statement. Sales rose 8.7 percent to $2.13 billion. Analysts on average estimated (BRCM:US) a profit of 42 cents a share on sales of $2.09 billion, according to data compiled by Bloomberg.
Broadcom gets the majority of its wireless-division revenue from (BRCM:US)Apple Inc. (AAPL:US) and Samsung Electronics Co., which combined control more than half of the smartphone market and have models such as the iPhone 5 and Galaxy that are dominating the market. Broadcom’s chips provide Wi-Fi and Bluetooth connections in the iPhone, iPad and Samsung’s Galaxy SIII handset.
Broadcom predicted fourth-quarter sales of $1.95 billion to $2.1 billion, compared with an average analyst estimate of $2.11 billion, according to data compiled by Bloomberg.
“Mobile and wireless is doing extremely well,” Daniel Amir, an analyst at Lazard Capital Markets, said by telephone. “Even though the other businesses were a little bit challenging, I’m encouraged.” Amir has a buy rating on the stock.
Excluding certain items, Broadcom had a third-quarter profit of 79 cents, compared with an average analyst estimate of 77 cents.
The shares rose less than 1 percent to $33.55 in extended trading after slipping (BRCM:US) 0.2 percent to $33.36 at the close in New York. The stock has risen 14 percent this year.
The company’s infrastructure and wireless business will be down from the third quarter as phone-service providers continue to hold off on upgrading their networks, Chief Executive Officer Scott McGregor said on a conference call with analysts. Mobile and wireless, which posted a 14 percent increase in the third quarter from the preceding three months, will be down slightly in the fourth quarter as phone makers complete their build of products for the year-end holiday shopping season.
Gross margin on products, or the percentage of sales remaining after deducting the cost of production, was 48.8 percent in the quarter. For the fourth quarter, that profit indicator will be “flat to up slightly,” the company said in its statement.
On Oct. 5 Samsung, the world’s biggest maker of mobile phones, said operating profit at its telecommunications unit almost doubled after it shipping an estimated 57.1 million smartphones. The Galaxy SIII sold more than 20 million units in the first hundred days after its May debut.
Apple, which reports earnings on Oct. 25, began selling its updated iPhone 5 earlier in September. It sold a record of 5 million phones in the first three days, the company said.
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