Broadcom Signals Weakness for Cisco

NEW YORK ( TheStreet) -- Late Tuesday, Broadcom ( BRCM) offered more signs of slump in the cable TV sector, a bad omen for Cisco ( CSCO), which posts its second-quarter earnings next week.

The communications chip maker delivered solid fourth-quarter results, but offered disappointing first-quarter guidance, sending its shares down 6% Wednesday.

Among the worries, Broadcom pointed to a potential inventory buildup at two of its set-top box customers.

"We expect Broadcom revenue to decline in the first quarter due to excess inventory and a couple of our customers ordering more than underlying demand in fourth quarter," Broadcom CEO Scott McGregor told analysts on the company's earnings call Tuesday.

And since Cisco and Motorola Mobility ( MMI) basically fill that entire description, analysts had a easy time picking out the usual suspects.

"We believe that Motorola Mobility and Cisco are major buyers of Broadcom's set-top box chipsets and that Broadcom's inventory comments suggest ramping inventory," JPMorgan analysts wrote in a note Wednesday to clients.

The news of weak underlying demand for set-top boxes should sound familiar to Cisco investors. In November, Cisco shares got crushed after the company reported hitting certain "air pockets," including canceled orders for set-top boxes.

The situation hasn't improved either. With consumers opting for satellite TV or Internet video, the so-called cord-cutting trend continues. Time Warner Cable ( TWC) said last week that it lost 141,000 video subscribers in the fourth quarter and nearly half a million for the year.

The eroding cable TV business will not help Cisco put together a solid story for investors when the networking gear maker reports earnings next week.

--Written by Scott Moritz in New York.

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