Broadcom Networking Chips Push Sales Past Analyst EstimatesIan King
Broadcom Corp., a maker of communications chips, reported sales that topped analysts’ estimates as demand for computer-networking gear boosted orders and helped it overcome struggles in the mobile phone market.
Revenue from products in the first quarter rose 1.1 percent to $1.98 billion, the Irvine, California-based company said yesterday in a statement. Analysts on average projected sales of $1.96 billion, according to data compiled by Bloomberg.
While Broadcom has failed to gain share from Qualcomm Inc. in the market for mobile phone modems, its chips that help connect networks of computers are in demand as companies upgrade their infrastructure. Broadcom also sells parts for home gateways and routers, a market that’s benefiting from demand for fast data to feed signals to 4K high-resolution televisions.
“Enterprise switching and networking might be OK for them,” said Doug Freedman, an analyst at RBC Capital Markets who has the equivalent of hold rating on the stock. “We may have a consumer winner in 4K TV that supported a broadband build out.”
First-quarter net income fell 14 percent to $165 million, or 28 cents a share, from $191 million, or 33 cents, a year ago. Total revenue declined from a year earlier, when Broadcom recorded $43 million from an income agreement with Qualcomm.
Broadcom shares rose 2.4 percent to $31.14 at yesterday’s close in New York. The stock has gained 5 percent this year.
Second-quarter revenue will be $2 billion to $2.1 billion, Broadcom said. Analysts on average predicted revenue of $2.07 billion, according to data compiled by Bloomberg.
“In the current quarter, we expect momentum in infrastructure and broadband to continue, driven by service provider spending on network buildouts and technology upgrades,” Chief Executive Officer Scott McGregor said in the statement.
Broadband revenue rose 4 percent to $559 million in the first quarter, and infrastructure chip sales rose 35 percent from a year earlier to $579 million. Sales in Broadcom’s mobile division slumped 15 percent to $846 million.
McGregor said that the company has mobile phone chips that will work on the new long-term evolution standard coming to market this year. The success of those products and the economic viability of the unit will determine whether Broadcom continues to invest or shut it down.
“We don’t do businesses to lose money,” McGregor told analysts on a conference call. “Right now it’s too early to call.”