Broadcom net income falls 75%
Broadcom Corp., the Irvine-based semiconductor maker, said Tuesday that profit fell 75% after an expansion into the mobile-phone market boosted research spending.
Third-quarter net income dropped to $27.8 million, or 5 cents a share, from $110.2 million, or 19 cents, a year earlier, Broadcom said. Sales rose 5.2% to $950 million.
Chief Executive Scott McGregor stepped up product research and development to challenge Texas Instruments Inc. and Qualcomm Inc. in the mobile-phone chip market. McGregor said he didn’t expect “substantial” revenue from that effort until 2009. His comments sent Broadcom’s shares down as much as 13% in extended trading.
“R&D; is not horrible in light of what they’re doing on the top line, but investors were looking for some slowing down there,” said Ruben Roy, an analyst at Pacific Crest Securities in Portland, Ore.
Broadcom shares fell as much as $5.44 to $36.62 in extended trading after closing up 36 cents at $42.06.
Broadcom forecast fourth-quarter sales of $960 million to $990 million. That doesn’t include license revenue from Verizon Wireless, which pays royalties to Broadcom. Analysts had estimated sales of $987.8 million in the period, according to a Bloomberg survey. The company doesn’t give profit predictions.
Third-quarter sales exceeded the company’s forecast of $915 million to $940 million in July. Analysts had estimated sales of $929.8 million, according to the Bloomberg survey.
Spending on research and development jumped 29% last quarter to $352.3 million, outpacing sales growth.
“In the fourth quarter and in 2008, we will continue to invest aggressively in research and development of products for the very large cellular handset market,” McGregor said.
Nokia, the world’s largest phone maker, and Samsung Electronics Co., the third-largest, have enlisted Broadcom to provide chips for their devices.
These kinds of customers may add $2 billion to Broadcom’s sales in 2009, said Adam Benjamin, an analyst at Jefferies & Co. in Boston.
Broadcom also faces legal challenges in the mobile-phone market. A dispute with Qualcomm over technology royalties is boosting Broadcom’s legal fees, Benjamin said.
