Broadcom Slips Further

Shares of Broadcom Corp., the leading U.S. maker of cable-modem computer chips, retreated Tuesday for the second day in a row amid concern that the stock may be overpriced after almost doubling in the last six weeks.

Broadcom fell $19.25, or 12%, to $138 in trading of 1.65 million shares, more than twice the three-month daily average volume.

On Monday, the shares fell $22 to $157.25 as 1.7 million shares changed hands.

Irvine-based Broadcom nearly doubled in price from Dec. 1 to Friday, when it set a record closing high of $179.25. At Monday’s close, the stock was trading at more than 220 times 1998 earnings and 165 times this year’s estimated earnings, according to a briefing note by Mark Edelstone, a Morgan Stanley Dean Witter analyst, who lowered his rating to “neutral” from “outperform.”

“The 235% advance in Broadcom versus a 34% increase in the S&P; 500 since Sept. 1, 1998, suggests a neutral rating is warranted in the near term,” he wrote.

Broadcom remains a fundamentally sound company, and demand for its products continues to be strong, Edelstone said. Moreover, the company may report a positive earnings surprise when it releases fourth-quarter earnings Jan. 26, he said.