Broadcom Earnings Hit High; Shares Rocket
Highflying Broadcom Corp. (BRCM) reached new heights Tuesday, rocketing to $33.25 a share, and after the close of trading the chip maker reported its best-earnings year ever. The stock’s rise enriched the company’s co-founders by nearly $600 million each in a single day.
The gain is the latest in a series of run-ups in Broadcom’s stock in recent weeks, boosting not only the value of the founders’ shares but also those of hundreds of other employees, who have become millionaires on paper.
Broadcom co-founders Henry T. Nicholas III and Henry Samueli have seen the value of their stock gain nearly $2 billion each since late November, reaching $5.9 billion each with the stock’s surge on Tuesday.
Broadcom--which makes chips for networking equipment such as cable modems and digital set-top boxes--said that its fourth-quarter profit soared fourfold on record revenue.
But the stock moved up early in the session, hitting a 52-week high of $332.13 before settling back a bit to close at $328.50. The shares were trading around $197 at the end of November.
Broadcom, moving to bolster its position in the fast-growing high-speed networking market, also said Tuesday that it agreed to buy closely held BlueSteel Networks Inc. for $110.7 million in stock. The deal would allow Broadcom to add security features to its high-speed chips.
The BlueSteel deal is expected to close within two months, and Broadcom will take a first-quarter charge to cover related costs, said William Ruehle, Broadcom’s chief financial officer.
The chip company also announced a 2-for-1 stock split, effective Feb. 11 for shareholders of record Jan. 31.
Broadcom officials attributed the company’s spectacular growth to its expanded product lines, and also to the exploding use of the Internet for high-speed phone, video and data traffic.
Net income for the three months hit $36.9 million, or 31 cents a share, up from $8 million, or 7 cents a share, for the fourth quarter of 1998.
Wall Street had expected Broadcom to report a profit of 27 cents per share for the quarter. Revenue totaled $160.8 million, up from $74.6 million.
For the year, net income rose to $105.8 million, or 91 cents a share, from $24.6 million, or 24 cents a share, in 1998.
The recent results exclude one-time charges of $22.5 million for mergers and litigation settlement. Revenue rose to $518.2 million from $216.5 million.
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Soaring Broadcom
Broadcom’s stock, which surged 11% on Tuesday, has been on a tear, nearly quintupling in the last year. Weekly closes and latest on Nasdaq since January 1999:
Tuesday: $328.50, up $33.25
