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Broadcom Forecasts Sales That May Top Analysts’ Estimates

Jan. 31 (Bloomberg) -- Broadcom Corp., a maker of chips that help mobile devices connect to the Internet, forecast first-quarter sales that may exceed analysts’ estimates amid stronger demand for parts for Apple Inc.’s iPhone.

First-quarter revenue will be $1.7 billion to $1.8 billion, the Irvine, California-based company said in a statement today. Analysts on average had estimated sales of $1.73 billion, according to data compiled by Bloomberg.

Broadcom is benefiting from demand for radio chips that help Apple’s smartphones and tablets connect over Wi-Fi and Bluetooth signals. Apple’s phone sales more than doubled to 37 million in the quarter. Broadcom’s forecast allayed concerns that weaker mobile-phone shipments in the first quarter would drag down chip orders, said Daniel Amir, an analyst at Lazard Capital Markets in San Francisco.

“This is definitely a positive surprise,” said Amir, who recommends buying the shares. “It’s possible that their share gains are leading to them outgrowing the industry.”

Broadcom shares climbed 2.5 percent to $35.20 in extended trading after the report. They fell less than 1 percent to $34.35 at the close in New York. The stock has gained 17 percent this year.

Fourth-Quarter Profit

Fourth-quarter net income fell to $254 million, or 45 cents a share, from $266 million, or 47 cents, a year earlier, the company said. Sales in the period declined 6.4 percent to $1.82 billion. Excluding certain costs, Broadcom’s profit was 68 cents.

Broadcom was estimated to have fourth-quarter profit before costs of 65 cents a share on sales of $1.8 billion, the average analysts’ estimates in a Bloomberg survey.

While demand for older, so-called 2G mobile-phone chips is declining, the company expects to gain market share with 3G wireless products and combination chips that only Broadcom can make, Chief Executive Officer Scott McGregor said today on a conference call with analysts.

“We know of no other competitor who can say they’re best in class for all of these components,” he said. “There’s an opportunity for us to increase share in combo chips this year.”

Apple accounted for 16 percent of Broadcom’s total sales in 2011, according to an estimate from Uche Orji, an analyst at UBS AG in New York. Apple uses a Broadcom chip to supply Wi-Fi, Bluetooth and other radio connections.

Product gross margin, or the percentage of sales remaining after deducting the cost of production, will be “roughly flat” in the current quarter from the 49.3 percent reported in the fourth quarter, the company said.

Separately, Broadcom said it increased its quarterly dividend by 11 percent to 10 cents a share.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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