Broadcom's Earnings Miss Estimate - Analyst Blog

Leading semiconductor manufacturer Broadcom Corp. (BRCM) reported a GAAP net income of $191 million or 33 cents per share in first quarter 2013 versus $88 million or 15 cents in the year-ago quarter. The year-over-year increase in earnings was primarily driven by a better-than-expected performance by wireless baseband and connectivity chips. Despite more than a two-fold rise, the reported earnings missed the Zacks Consensus Estimate by a couple of cents.

Non-GAAP net income stood at $400 million or 65 cents per share in the reported quarter compared to $387 million or 65 cents in the year-earlier quarter.

Revenue

Total revenues for first quarter 2013 were $2.0 billion, up 11.1% year over year and ahead of the Zacks Consensus Estimate of $1.9 billion. In terms of revenue composition, product revenues came in at $1.9 billion in the reported quarter, while income from the QUALCOMM Incorporated (QCOM) agreement came in at $43 million and license revenues stood at $8 million.

In terms of end markets, Broadband Communications revenues were $537 million, up 9% year over year, driven by growth in set-top boxes. Mobile & Wireless segment revenues decreased 2% sequentially to $996 million. Revenues from Infrastructure & Networking segment climbed 6% year over year, driven by a growth in large-scale cloud data center build-outs and optical transport networking market.

Margins

Non-GAAP product gross margin remained relatively flat at 52.0% in the reported quarter, while GAAP product margin came in at 49.4%, up from 48.1% in the year-ago quarter.

GAAP research and development and selling, general and administrative expenses were $794 million in first quarter 2013 compared to $725 million in the prior-year quarter.

Balance Sheet/Cash Flow

Broadcom generated $388 million in cash from operations in first quarter 2013. The company ended the quarter with cash and cash equivalents of $1.7 billion, marginally up from $1.6 billion at year-end 2012. Long-term debt was fairly stable at $1.4 billion.

Guidance

Concurrent with the earnings release, management provided its guidance for second quarter 2013. Total revenue is expected to be around $2.1 billion. Product gross margin on a GAAP basis as well as on a non-GAAP basis are expected to be down 50 basis points sequentially in the second quarter of 2013. Research & development and selling, general, and administrative expenses (both GAAP and non-GAAP) are expected to be flat to up to $20 million sequentially.

Broadcom presently has a Zacks Rank #4 (Sell). Other notable companies in the sector that are worth mentioning include Nitto Denko Corporation (NDEKY), carrying a Zacks Rank #1 (Strong Buy), and Texas Instruments Inc. (TXN), carrying a Zacks Rank #2 (Buy).

BROADCOM CORP-A (BRCM): Free Stock Analysis Report

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QUALCOMM INC (QCOM): Free Stock Analysis Report

TEXAS INSTRS (TXN): Free Stock Analysis Report

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