Broadcom Beats Forecasts, Posts $19-Million Earnings

By JONATHAN GAW

April 21, 1999 12 AM PT

TIMES STAFF WRITER

Cable modem chip supplier Broadcom Corp. on Tuesday said its earnings more than doubled in the past quarter as revenue skyrocketed, fueled by strong growth in sales of its networking products and digital television set-top box and cable modem chips.

In the first three months of this year, the Irvine-based firm earned $19.3 million, or 19 cents a share, up from $7.7 million, or 9 cents a share, a year ago. The per-share earnings in the most recent quarter handily beat the 14 cents a share expected by Wall Street analysts surveyed by Zacks Investment Research.

Revenue totaled $96.3 million, up from $35.3 million.

On a day when technology stocks in general rebounded strongly from sharp falls the day before, Broadcom stock rose $4.48 to close Tuesday at $64.38. The earnings figures were released after the market closed, prompting investors to bid the stock up to $68 in after-hours trading.

“Everyone was expecting a very strong quarter, and the stock is already priced that way,” said Greg McClenon, an analyst with Preferred Capital Markets. “They’re in the right place at the right time, and they’re executing.”

Broadcom dominates the market for semiconductors in television set-top boxes, which unscramble the signals being sent by cable or satellite.

Advanced versions of those boxes are seen as the key to enabling high-speed Internet connections, interactive television and telephone service to enter the home through the cable television system.

The company this quarter also began producing in volume high-speed networking products for personal computers and other intelligent devices.

In the second half of this year Broadcom also plans to introduce products resulting from its pending acquisition of Maverick Networks, which is expected to occur in May, said Henry T. Nicholas III, Broadcom’s president and chief executive.

Those products, called Layer 3 switches, bridge the gap between local area networks that might be found in a home or small business and wide area networks, which cover long distances via telephone lines, cables and satellites.

The company also sees a significant boost in the demand for its cable modem chips as a result of a standard, called DOCSIS, agreed to last month by cable television system operators.

That agreement paves the way for cable modems to be sold in retail stores for the first time by the end of the year, Nicholas said.

This quarter, for the first time, Broadcom sold more DOCSIS cable modem chip sets than chips using proprietary systems, Nicholas said.

“We believe this will really explode and have the potential to become the replacement for” traditional computer modems, Nicholas said.

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Major Gains

Cable modem chip-maker Broadcom Corp.’s first-quarter sales and earnings more than doubled from the same period last year. The company’s stock price, though, has been on something of a roller-coaster. Sales and earnings in millions; weekly stock closing prices adjusted for 2-for-1 split in February:

1998

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Sales Earnings 1st qtr. $35.3 $7.7 2nd qtr. $45.2 $7.7 3rd qtr. $52.5 $8.2 4th qtr. $70.1 $12.8 1999 1st qtr. $96.3 $19.3

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Stock Closing Prices

1998

Oct. 2: $33.31

Oct. 9: $31.06

Oct. 16: $36.25

Oct. 23: $37.75

Oct. 30: $41.47