Broadcom gets whacked, but the stock gets a lift
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While the feds were slapping chip maker Broadcom Corp. today for a huge stock-options backdating scheme orchestrated by top executives from 1998 to 2003, the market was getting ready for the Irvine company’s first-quarter earnings report.
The results, released after the closing bell, were double what analysts had expected. That fueled strong demand for the stock after hours, driving the price up 9%, to $25.68 from $23.55 in the regular session. Broadcom’s shares now are up 56% from their 4 1/2-year low of $16.45 in March.
Which just serves as a reminder of how Wall Street sees the world. The market’s view is, ‘What have you done for me -- or to me -- lately?’ The options-backdating scandal is ancient news, however much some investors might like to see the company, and its executives, punished further.
Broadcom’s first-quarter profit rose to $74.3 million, or 14 cents a share, from $61 million, or 10 cents, a year earlier. Sales were up 15% to $1.03 billion.
The company, which makes chips for the telecom, cable TV and video-game industries, conceded it was surprised by the high level of orders in the quarter. Based on the trend in orders, CEO Scott McGregor said he expected ‘solid revenue growth’ in the current quarter as well.
Broadcom also could benefit this year from easy profit comparisons with last year, when earnings dived in part because of heavy research-and-development spending to fund the company’s push into chips for mobile phones. So far, though, R&D spending remains high, at $356 million in the first quarter compared with $301 million a year earlier.
Posted April 22, 2008