Investors Pound Broadcom, Other Top Tech Stocks
Communications chip leader Broadcom Corp., microprocessor maker Intel Corp. and Apple Computer all beat Wall Street’s profit estimates in their most recent fiscal quarters--yet profit-takers hammered each company’s share price in a broad retreat of technology shares Tuesday.
Already the fastest-growing chip maker ever, Broadcom’s second-quarter performance put the company on pace to reach $1 billion in revenue a year--a distinction it gained faster than any previous company, said analyst Mark Edelstone of Morgan Stanley Dean Witter.
The Irvine manufacturer reported a record quarter, with $245.2 million in revenue, more than double the $119.5 million in sales a year earlier.
The company earned 23 cents a share, handily beating the 19-cent consensus of analysts polled by Zacks Investment Research. Including one-time charges relating to acquisitions, net income was 22 cents a share. Earnings before those charges hit a record $57.4 million, compared with $20.1 million a year earlier.
Yet Broadcom shares dropped 6% Tuesday, losing $15.69 to close at $245.75 a share. Only Monday, the stock reached a record closing high of $261.44 a share on Nasdaq.
The drop, however, didn’t faze analysts.
“These guys look bulletproof right now,” said Alex Gauna, an analyst with Banc of America Securities. “We have not seen them come out wanting anywhere. They have a leadership or virtual monopoly in every single one of their target markets.”
Henry T. Nicholas III, Broadcom’s chief executive, credited a broad-based strategy--developing technologies to enable high-speed communications over a range of networks serving homes and businesses.
“Every single market we’ve entered, we’ve become the dominant player. And every single market has grown faster than we predicted,” Nicholas said.
Despite serious parts shortages, Intel’s revenues rose to a record $8.3 billion in its second quarter, compared with $6.7 billion a year earlier. The 23% increase was fueled largely by huge gains in the company’s investment portfolio, one of the largest in Silicon Valley.
The Santa Clara company’s income, excluding one-time gains and expenses, hit $2.4 billion, up 4% from $2.3 billion a year earlier; at 50 cents per share, the company’s earnings beat by a penny a consensus estimate of analysts polled by First Call/Thompson Financial. Even so, Intel’s share price fell $3.31 to close at $143 in Nasdaq trading Monday. The stock had risen recently in anticipation of a favorable earnings report.
Despite recent incremental gains by rival Advanced Micro Devices, Intel held 82.1% of the market for PC microprocessors and a commanding 96% of the market for the most lucrative chips used in higher-performance PCs as of April, according to Mercury Research.
Longer term, Intel will need to increase sales of processors for server computers that operate the Internet and corporate networks, said Ashok Kumar, an analyst with U.S. Bancorp Piper Jaffray.
“In the traditional PC market, the growth rates are going down,” he said.
Kumar predicted that Intel would benefit from a surge in the wireless phone market, which analysts expect to exceed 1 billion units by 2003. Intel offers a strong package of chips to third-generation cellular phones that should enable a wide range of high-speed Internet and messaging services.
Apple’s fiscal third quarter profit from operations rose 43% to $163 million, or 45 cents a share, before a gain from the sale of stock in chip-maker ARM Holdings brought its net income to $200 million, or 55 cents.
While Apple beat average Wall Street predictions by 1 cent, it missed the higher informal estimates, or “whisper numbers,” circulated on the Internet.
In a conference call with analysts, Apple’s chief financial officer, Fred Anderson, blamed slowing iMac sales and a lack of new products for the relatively disappointing 17% rise in revenue to $1.83 billion.
Apple CEO Steve Jobs will announce new products today at a trade show in New York, with others to follow more rapidly than in the last nine months, Anderson said.
He projected revenue growth of at least 10% for the rest of this fiscal year. The company also announced it will begin selling its desktop and portable computers in Circuit City stores.
Cupertino-based Apple’s shares fell to $53 in after-hours trading after closing at $57.25, down $1.06 in regular Nasdaq trading.
At a Glance
Other technology sector earnings, excluding one-time gains or charges unless noted, include:
* Commerce One Inc., whose software and consulting services help businesses create online marketplaces, said its second-quarter loss widened to $16.2 million, or 10 cents a share, from a loss of $9.7 million, or 9 cents, a year ago. Analysts expected a much deeper loss of 21 cents. Sales soared to $62.7 million from $4.2 million a year earlier.
* DoubleClick Inc., the largest online advertising company, said its second-quarter loss narrowed to $3.82 million, or 3 cents a share, from $4.29 million, or 4 cents, a year ago, beating the 5-cent average loss analysts expected. Revenue more than doubled to $128.1 million from $49.9 million, and operating expenses also more than doubled.
* RealNetworks Inc., maker of the top Internet media player software, reported a second-quarter profit of $10.6 million, or 6 cents a share, compared with a loss of $548,000, or break-even per share, a year ago. The results beat analyst forecasts by a penny. Revenue soared to $62.7 million from $28.5 million, led by premium versions of its free software for playing Internet audio and video files and of software that allows companies to create and distribute these files.
* Network Associates Inc., a maker of computer security software, reported second-quarter profit of $36.2 million, or 24 cents a share, 2 cents better than estimates, excluding amortization, other costs and the results of its 80%-owned McAfee.com Corp. Including those items, net income was $11.4 million, or 8 cents a share, compared with a loss of $195.8 million, or $1.41 per share, a year ago. Sales climbed more than ninefold to $233.7 million from $25.2 million.
* Sybase Inc.’s second-quarter earnings soared 70% to $23.6 million, or 25 cents a share, beating estimates of 22 cents, on higher licensing revenue. Sales rose 11% to $234.1 million from $210.2 million.
* Unisys Corp., which warned last month of lower sales and earnings, said second-quarter profit tumbled 52% to $56.3 million, or 18 cents a share, because of falling mainframe and services revenue. The results were a penny less than analyst estimates that had been reduced after the company’s profit warning, its third in nine months. Revenue slid 16% to $1.59 billion.
