Broadcom Posts $41.1-Million Loss
Communications chip maker Broadcom Corp., its revenue sagging as key customers reduced their orders, said Wednesday that it lost $41.1 million in the second quarter, slightly better than analysts had expected.
Revenue should remain flat in the third quarter, resulting in another loss, Chief Financial Officer William Ruehle said.
But, sounding a more optimistic note than some competitors, Ruehle said Broadcom executives have seen “some signs of stabilization” that could put the Irvine company in the black by the end of the year.
Executives at other chip companies and semiconductor equipment makers, including Applied Materials Inc., have said they are not optimistic that sales and profits will improve this year.
Investors applauded the results, boosting the stock after Broadcom’s announcement. The shares, which had fallen $3.27 to $39 during the Nasdaq session Wednesday, traded as high as $42.50 after regular trading hours.
The second-quarter loss of $41.1 million, or 16 cents a share, compared with a profit of $61.1 million, or 24 cents a share, a year ago. Analysts had expected a loss of 17 cents a share, according to a survey by First Call/Thomson Financial. Revenue fell 14% to $210.9 million.
The results are “very much in line with the general economic slowdown,” said Broadcom Chief Executive Henry T. Nicholas III.
The loss excluded acquisition-related costs and other charges, which pushed the net loss to $436.4 million, or $1.73 a share, compared with net income of $55.9 million, or 22 cents a share, in the second quarter of 2000.
The company also said it cut more than 200 jobs during the quarter--about 7% of the work force--in an effort to streamline operations. About 100 employees were terminated, with the other positions eliminated through attrition.
Broadcom, which makes chips for computer networking products, digital cable-TV set-top boxes and cable modems, last year reached $1 billion in revenue. But the firm has been hard-hit by the slowing demand for telecommunications equipment as customers such as Cisco Systems Inc. cut back on orders and reduced their inventories.
Analysts were split on the company’s near-term outlook.
“There’s still going to be risk for the next two quarters,” said Venu Reddy, an analyst at Waddell & Reed Financial Inc., which sold most of its Broadcom stake last quarter. “This is a bad environment.”
But analyst Jim Liang said he believes sales will rebound because chip inventories have mostly been depleted and the U.S. economy will begin to recover in the fourth quarter. Liang, with WR Hambrecht & Co., said he upgraded Broadcom shares to “buy” from “neutral” last week and upgraded rival Vitesse Semiconductor Corp. and chip maker Altera Corp. to “strong buy” from “buy.”
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Bloomberg News was used in compiling this story.
