Broadcom Corp. (BRCM:US), a maker of chips that help mobile devices connect to the Internet, rose the most since July after reporting first-quarter sales and profit that beat estimates as orders for tablet and handset parts increased.
First-quarter net income rose to $191 million, or 33 cents a share, from $88 million, or 15 cents, a year earlier, the Irvine, California-based company said yesterday in a statement. Sales increased 10 percent to $1.95 billion, beating the $1.91 billion projection. Profit excluding some items was 65 cents a share, topping a 56 cent estimate.
Broadcom’s chips provide the short-range wireless connectivity in products such as Apple Inc. (AAPL:US)’s iPhone and iPad and Samsung Electronics Co.’s Galaxy line of mobile devices. Those two customers account for more than 30 percent of sales, according to supply chain analysis by Bloomberg. Apple yesterday reported better iPhone sales that beat some estimates.
“Most of investors had braced themselves for a very challenging quarter in mobile and wireless at Broadcom and they came in better than expected,” said Patrick Wang, an analyst at Evercore Partners Inc. (EVR:US) He has an overweight rating on Broadcom shares and a $40 target price. “Apple wasn’t as bad as the rumors had made them out to be.”
Broadcom rose 5.5 percent to $34.78 at 9:41 a.m. in New York after climbing as much as 6.1 percent, the most intraday since July 25. The shares (BRCM:US) had dropped less than 1 percent this year through yesterday, compared with an 11 percent gain for the Standard & Poor’s 500 Index.
Second-quarter revenue will be $2.02 billion to $2.18 billion, the company said. Analysts on average had projected sales of $2.05 billion, according to data (BRCM:US) compiled by Bloomberg.
Broadcom’s wireless business had sales of $996 million in the first quarter, up from $875 million a year ago. For this quarter, the company expects revenue in that business to rise sequentially, it said in a separate statement.
Under Chief Executive Officer Scott McGregor, Broadcom is also moving into the market for so-called baseband chips used to connect phones to cellular networks, an area dominated by Qualcomm Inc. (QCOM:US) Broadcom has won Samsung as a customer for older types of technology and is in a race with companies such as Intel Corp. to become a challenger to Qualcomm in the market for the latest high-speed data connections, so-called long term evolution, or LTE.
Apple reported yesterday that it sold 37.4 million iPhones in the quarter, beating an average analyst estimate of 35.4 million. It sold 19.5 million iPads, compared with an estimate of 18.5 million units.
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