Broadcom's Net Surges
Updated from 4:32 pm EDT
SAN FRANCISCO -
Broadcom's
(BRCM)
bread-and-butter businesses are booming. But the company's quest to tap new markets for growth will take longer than planned.
The Irvine, Calif., chipmaker blew past Wall Street expectations Tuesday and delivered a strong sales outlook for the current quarter, thanks primarily to better-than-expected demand for cable set-top box and broadband modem chips -- two of Broadcom's oldest and most established businesses.
Efforts to become a player in the cell phone market however, are not going as smoothly.
"Based on our current bottoms-up view, we now believe it will take us longer than originally anticipated to reach our goal of 10% to 15% market share
in the market for cell phone baseband chips," said CEO Scott McGregor in a post-earnings conference call Tuesday.
The company said it remained committed to achieving the market-share goal, but noted that it will no longer provide a public timeline for hitting the mark.
Investors appeared little concerned with the cell phone challenges, given the strength that Broadcom said it is seeing in its other businesses.
Broadcom projected that sales in the current quarter will range between $1.075 billion to $1.125 billion, well ahead of the average analyst expectation of $1.03 billion.
McGregor said the company remains cautious about economic conditions, but noted that strong ordering trends during the first quarter mean the company expects solid revenue growth in the second quarter in each of its three major target markets.
Shares of Broadcom surged 8.5%, or $1.99, to $25.54 in extended trading Tuesday.
Sales in the three months ended March 31 totaled $1.03 billion vs. $901.5 million at this time last year. Analysts polled by Thomson Financial were looking for $992.3 million in revenue.
Broadcom posted net income of $74.3 million, or 14 cents a share in the first quarter, compared with net income of $61 million, or 10 cents a share, at this time last year.
Excluding 21 cents of stock-compensation expenses and 4 cents of acquisition related charges, Broadcom had an adjusted EPS of 39 cents a share. Analysts were expecting EPS of 28 cents, excluding stock compensation expenses.
Executives said much of the upside came from strength in the enterprise networking and broadband communications groups.
In particular, the company pointed to better-than-expected orders from cable and satellite TV set-top box makers. And increasing build out of networks has spurred demand for the chips Broadcom makes for switching equipment.
Broadcom's first-quarter results also included $35.6 million of royalties from a patent license agreement with
Verizon
(VZ) - Get Report
entered into in July 2007.
Operating expenses increased $12 million sequentially in the first quarter, less than the guided range of a $13 million to $18 million uptick. Broadcom noted that efforts to tighten spending will vary quarter by quarter due to the unpredictable nature of various legal matters and other factors.
In a separate announcement Tuesday, Broadcom said it had agreed to pay $12 million to settle an investigation into stock option backdating with the
Securities and Exchange Commission
, without admitting or denying the allegations.
As for Broadcom's investments in the cell phone business, which have driven up the company's research and development expenses in recent quarters, executives suggested that the company might moderate its spending.
While Broadcom has made strides in the cell phone business, winning contracts to supply chips to handset makers
Nokia
(NOK) - Get Report
and
Samsung
, most of the revenue from those deals is not expected until 2009 at the earliest.
McGregor stressed that those deals remain on track. But he said that the timing of the rollout of the products was not in Broadcom's control, and thus the company can't accurately predict when it will start to see its desired market share gains.
Broadcom's new outlook regarding the cell phone business comes a month after Yossi Cohen, the head of the cell phone group, left the company to take a job as CEO of private chip firm
Symwave
. On Tuesday, Broadcom appointed Scott Bibaud as the new head of the mobile platforms group.
Broadcom said its first-quarter gross margin of 53.4% will decline slightly in the current quarter, as the company brings new products to market.








