A Piper Jaffray analyst downgraded
on Monday, saying the company's 2004 earnings could be pressured by competition in the chipset sector.
Shares of the communications company were down $1.18, or 5.2%, at $21.58 Monday morning.
Broadcom's ServerWorks segment will face competition from
upcoming chipsets, which have been designed for both
2004 server platforms, said analyst Ashok Kumar. On this basis, he cut his 2004 earnings estimate for Broadcom and lowered its investment rating to underperform from market perform.
ServerWorks is seen contributing more than half of the company's 2003 operating profit and a quarter of revenue, Kumar said. But based on the struggle with Dell and H-P, ServerWorks' contribution could decline from $450 million in 2003 to $250 million in 2004, "with a more dramatic impact to earnings," said Kumar.
As such, Kumar's new 2004 EPS estimate is 50 cents a share, compared with 62 cents previously. Analyst consensus is currently 65 cents a share. "The short-term outlook for ServerWorks is a slow but steady erosion in market share to Intel," Kumar concluded.
The company's shares
fell 10% last week despite news that it beat analysts' second-quarter earnings estimates. Just over two weeks ago, however, a Lehman analyst
had seen some positives in the company and had upgraded it.