Guidance Boosts Broadcom

The stock jumps 16% after a blowout quarter.
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Updated from Jan. 26.

Broadcom

(BRCM)

shares surged 21% Friday after a blowout quarter and some rock 'em, sock 'em guidance.

The Irvine, Calif., broadband chipmaker posted fourth-quarter net income of $194.8 million, or 50 cents a share. That's up 18% from the prior quarter. On a pro forma basis, adjusting for one-time items, Broadcom made 50 cents on sales of $820.6 million. Those numbers compare with an adjusted profit of 23 cents on $539 million in revenue in the year-ago quarter.

"Just huge. Absolutely huge," a hedge fund manager who is long the stock said late Thursday. "The top line was above even the highest whisper numbers I was hearing. This is a product cycle story you just can't argue with."

Indeed, the solid performance exceeded analysts' expectations for the quarter, which called for a pro forma profit of 44 cents on $780 million in sales.

"Trends in communications and convergence provided a one-two punch that drove Broadcom to record levels of revenue, net income, and cash and marketable securities in 2005," CEO Scott McGregor said in a press release Thursday. Broadcom makes chips and components for portable media players, satellite set-top boxes Bluetooth short-range device connections, as well as DSL and cable modems.

Broadcom also raised its guidance for the current quarter ending in March. The company expects sales growth over the most recent quarter in the mid-single digit range, somewhere between $865 million to $875 million.

Analysts had expected first quarter revenue of $761 million or a 2% sequential decline.

On a conference call with analysts, Broadcom said orders exceeded production and ruled out any immediate inventory surplus issues. But the company says it plans to monitor the market for signs of oversupply.

Separately, Broadcom says it plans a 3-for-2 stock split and will add $500 million to its share buyback program.

Budget for the original share buyback program was $250 million and the company has repurchased $154 million worth of stock to date. The new plan authorizes and additional $500 million, with repurchases starting at the end of this month.

Broadcom shares surged $12.08 Friday to $70.80.