Broadcom Corp. posted an 8% jump in first-quarter profit, but its shares plunged Tuesday after the company said key customers for its wireless microchips were having trouble competing in the cellphone market.
The Irvine-based chip maker said revenue from the unit that makes chips for Nokia and Samsung declined. Both mobile-phone makers reported weak earnings this month.
Broadcom also offered a sales forecast for the second quarter that was below what most analysts expected. Revenue is likely to be at most $1.85 billion, less than the analyst consensus of $1.9 billion.
Broadcom's stock dropped nearly 9% in after-hours trading, to $36.90. Its shares have slid 22% since mid-January, when the stock traded at a 52-week high of $47.39. The company reported its earnings after the close of regular trading.
The company ships nearly 1 billion chips every year for use in a wide array of digital devices, including set-top cable boxes, powerful Internet servers and 3-D televisions. It supplies components for some of the electronics world's best-known devices, from the Nintendo Wii to Apple's iPad 2 tablet computer.
But when it comes to mobile devices, its fortunes are yoked to Samsung and Nokia, the world's two largest cellphone manufacturers and two of Broadcom's most important customers.
"Nokia in general is sucking a bit of wind right now," said Stacy Rasgon, an analyst at Sanford C. Bernstein & Co. "They're making phones that nobody wants to buy."
Nokia's stock is down nearly 30% over the last year, and this month Samsung released a sales forecast for the current quarter that fell short of investor expectations.
In February, Nokia said it would team up with Microsoft Corp. to put that company's Windows Phone software on many of its upcoming devices. So far, Microsoft's smartphones have had trouble winning over consumers.
Broadcom reported profit of $228 million, or 40 cents a share, for the three months ended March 31, an 8% increase over the same quarter a year earlier. Its quarterly revenue of $1.82 billion was largely in line with what analysts expected.
Despite lackluster results from the wireless-chip business, Broadcom Chief Executive Scott McGregor said he expected new customers to bolster revenue. He cited a recent partnership with a Japanese phone maker but declined to say which firm it was.