Broadcom Forecasts Sales That Top Estimates; Stock Gainsby
Broadcom Ltd., which led a wave of consolidation last year to become one of the world’s top-10 chipmakers, predicted fiscal third-quarter sales that may beat analysts’ estimates on stronger demand for parts for mobile phones and networking.
Revenue will be $3.75 billion, plus or minus $75 million, in the period ending July 31, the Singapore-based company said Thursday in a statement. That compares with an average analyst estimate of $3.7 billion. Fiscal second-quarter revenue also topped analysts’ estimates.
A string of acquisitions has given Broadcom one of the most diverse customer lists in the industry. Demand for chips used in home Internet gateways and networking switches may have helped make up for a shortfall in demand in the previous quarter for semiconductors used in smartphones and computers, according to Ian Ing, an analyst at MKM Partners. Broadcom is now projecting that its wireless business will rebound.
“We are expecting a robust third quarter, led by strong growth in wireless revenue, and continued strength in wired networking, and remain confident in our ability to leverage earnings growth as we work toward full integration and achievement of our operating model,” Chief Executive Officer Hock Tan said in the statement.
The stock rose as much as 7.7 percent in extended trading following the announcement. Broadcom shares had closed earlier little changed at $154.91 in New York.
The company reported a net loss of $1.25 billion, or $3.02 a share, in the period ended May 1, compared with a profit of $344 million, or $1.21 a share, a year earlier. Adjusted revenue more than doubled to $3.56 billion. Analysts had estimated $3.55 billion. The company booked charges related to divisions it has spun off.
Tan has spent the past few years assembling a chipmaker worth more than $59 billion by buying up smaller companies and castoffs from some of the biggest names in the industry. He’s now integrating his biggest and latest acquisition, Broadcom, whose name the combined company has taken, instead of Tan’s Avago Technologies. The $37 billion deal announced in May 2015 was the biggest-ever chip merger and has created a debt load the company said it needs to work through before it can return to further acquisitions.
“There are just a lot of earnings accretion opportunities there,” Ing said. “They have a lot of levers for them to be able to manage earnings as they want to.”