Broadcom posts 8.4% revenue gain but sees weakness ahead
Broadcom Corp. posted an 8.4% increase in third-quarter revenue Tuesday, but the Irvine chip maker gave a soft outlook for the current quarter that executives said reflected weak industry demand.
The company reported revenue of $1.96 billion for the three months that ended Sept. 30, up from $1.81 billion in the same quarter last year and in line with what analysts expected.
Profit totaled $270 million, or 48 cents a share, compared with $328 million, or 60 cents, in the year-earlier period. Excluding certain costs, adjusted earnings were 82 cents a share, beating the analyst consensus of 77 cents, according to Bloomberg data.
Despite a better-than-expected third-quarter, Broadcom’s shares tumbled more than 5% in after-hours trading after the company said it expected fourth-quarter revenue to be $1.7 billion to $1.8 billion, significantly less than Wall Street projections of $2.01 billion. The company estimated that product gross margin would be flat to slightly down from the third quarter.
During regular trading, shares fell $1.59, or 4.3%, to $35.80.
“It seems a bit ugly compared to where expectations were,” Stacy Rasgon, a senior analyst at Sanford C. Bernstein & Co., said of Broadcom’s fourth-quarter outlook. “They’re definitely seeing fairly large declines across all aspects of their business.”
In a call with analysts Tuesday, Broadcom Chief Executive Scott McGregor said the chip maker remained focused on product innovation that would drive market growth and value for the company.
“Broadcom has a proven track record of success across semiconductor cycles, and we’ve positioned the company to once again emerge stronger coming out of the current uncertain economic environment,” he said.
Broadcom ships nearly 1 billion chips annually for use in an array of digital devices, including set-top cable boxes and Internet servers. It supplies components for popular devices such as the Nintendo Wii and the Apple iPad 2.
The company also said in its conference call with analysts that it was discontinuing development of chips for digital televisions and Blu-ray products over the next few quarters.
