Monday, July 25, 2011

Broadcom Corp. (NASDAQ: BRCM): Q2 Earnings Preview 2011

Broadcom Corp. (NASDAQ: BRCM) is scheduled to release its second-quarter earnings after the closing bell on Monday, July 25, 2011. Analysts, on average, expect the company to report earnings of 63 cents per share on revenue of $1.80 billion. In the year ago quarter, the company reported earnings of 66 cents per share on revenue of $1.60 billion.

Broadcom ships nearly a billion chips a year for use in devices all up and down the digital food chain, from the tiny radio in a Bluetooth earpiece to the processors that enable the Internet's largest data servers to communicate.  Broadcom is the leading supplier for 11 of the 18 types of chips it makes, including those that go into Blu-ray players and cable modems. The company designs chips for for many of the world's bestselling consumer devices: Android phones and Wiis, iPhones and iPads, to name a few. 

Broadcom has dramatically expanded its product line, enabling it to create a host of new products with the lowest-possible manufacturing costs. Broadcom has grown by acquiring smaller firms that develop complementary technologies in network communications. In the last decade, it has bought 43 companies, many of them in Europe, Asia and the Middle East.

The company has now seen net income rise in three straight quarters. The company has enjoyed double-digit year-over-year percentage revenue growth for the past four quarters

In the preceding first quarter, the Irvine, California-based company's net income was $228 million, or 40 cents a share, compared with a profit of $210 million, or 40 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 68 cents a share in the latest quarter. Revenue rose to $1.82 billio from $1.46 billion. Analysts, on average, had expected the company to report earnings of 59 cents a share on revenue of $1.81 billion.average, expected the company to report earnings of 74 cents per share on revenue of $1.90 billion.

At its last earnings call in April, the company said that it expects second-quarter revenue in the range of $1.75 billion to $1.85 billion, with margins anticipated to improve 50 basis points from the first quarter.

The company has benefited from sturdy demand for products in its mobile markets. Broadcom is well placed in the fast-growing wired and wireless communications markets, with cutting-edge solutions for a growing number of connected users who are demanding more content and bandwidth. The market for wireless connectivity devices are expected to grow, driven by the increasing demand for smartphones, tablets, netbooks and digital TVs. Broadcom is focused on the most innovative technologies related to connectivity, bandwidth and content. Broadcom’s product leadership and solid financial performance and strong cash flow generation continue to be strong positives. 

Meanwhile, smartphone chipmakers and hardware manufacturers are poised for substantial growth in 2011 on the strength of even stronger smart phone sales. Infrastructure growth and improvements worldwide have created more markets for the smartphone. The rapidly growing, billion plus populations of China and India, for example, still have relatively low smartphone sales. Between the two countries, there are under 200 million smartphone users combined.

Moreover, the rapid rise in users of smartphones and tablets, alongside mobile computers has prompted a vast increase in demand for higher bandwidth services. StrataXGS, its most recent switch solution promises carriers flawless network migration onto 4G as well as improved bandwidth and connectivity capabilities. 

During the quarter in review, the company unveiled a new Fibre Channel over Ethernet (FCoE) solution on what it calls the world’s fastest Converged Network Adapter (CNA). 

Full Disclosure: None.
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