Broadcom Says 4th-Quarter Sales Will Meet or Beat Expectations
Broadcom Corp., an Irvine-based maker of semiconductors used in consumer electronics, said Wednesday that fourth-quarter sales would meet or exceed the company’s highest forecast of $775 million because of demand for products such as wireless headsets.
Broadcom shares rose $3.11, or 7.2%, to $46.13. They are up 43% this year.
“We see the market remaining strong,” Chief Executive Scott McGregor, who made the new prediction, said at a meeting with analysts in Santa Clara, Calif. On Oct. 20, Broadcom forecast sales of $765 million to $775 million.
Broadcom’s fastest-growing products are Bluetooth processors used in wireless devices, McGregor said.
Motorola Inc. uses Bluetooth chips to connect wireless headsets to its Razr mobile phones. Broadcom also makes chips used in Apple Computer Inc.’s iPod digital music player and in set-top boxes that record television shows. McGregor said demand this quarter was “broad-based.”
“The current strong guidance of Broadcom reflects its leading positions in several of the industry’s fastest-growing end markets,” as well as low inventory, Cody Acree, a Dallas-based analyst with Legg Mason Wood Walker, wrote Wednesday in a note to investors.
Acree raised his fourth-quarter sales estimate to $785.4 million from $771.4 million and boosted his profit forecast to 44 cents a share from 42 cents.
Broadcom reported net income of $71.1 million, or 20 cents a share, on sales of $539.4 million in last year’s fourth quarter. Excluding some costs, profit was $80.7 million, or 23 cents.
Analysts expect sales of $770.1 million this quarter, the average of 24 estimates in a survey by Thomson Financial. Broadcom didn’t provide a profit forecast. Analysts expect profit of 43 cents, the average of 25 estimates. Thomson said its estimate excluded stock-based compensation costs.
Profit margins this quarter will narrow less than previously forecast, McGregor said.
Gross margin, the percentage of sales left after production costs, will narrow to no less than 52.9% from 53.4% in the third quarter. The company said Oct. 20 that the margin could shrink to 52.4%.
Operating expenses will climb at half the rate of sales, McGregor also said. Broadcom isn’t seeing a problem with customers having too much inventory, he said. Last year, many chip makers faced problems of excess inventory.
“This gives you a better sense of the strength we are seeing in our market,” McGregor said.
Competition will become more limited because of the increasing complexity of chips, said Chairman Henry Samueli, who co-founded the company in 1992 and is chief technical officer.
