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Broadcom's Profit Soars in Quarter

The Irvine company's revenue surges 52% on sales of chips for devices such as iPods. Its shares rise 24% after hours.

January 27, 2006|Terril Yue Jones | Times Staff Writer

Computer chip maker Broadcom Corp. said Thursday that fourth-quarter profit nearly tripled, breezing past analysts' forecasts and sending shares up 24% after hours.

Broadcom, which makes computer chips for wired and wireless communications, said earnings for the quarter ended Dec. 31 were driven by increased use of video and audio material over the Internet and sales to makers of portable devices such as cellphones and Apple Computer Inc.'s iPods.

Irvine-based Broadcom also said its board approved a 3-for-2 stock split and the repurchase of $500 million of stock, about 2% of shares.

Broadcom shares, which rose 64 cents to $58.72 in regular trading, soared to $73 after hours.

Chief Financial Officer Bill Ruehle told analysts in a conference call that he expected first-quarter sales of $865 million to $875 million. Analysts surveyed by Thomson Financial had expected $759 million on average.

For the fourth quarter, Broadcom said, net income rose to $195 million, or 50 cents a share, from $71 million, or 20 cents, a year earlier. Analysts had been expecting profit of 44 cents a share on average.

Revenue was $821 million, up 52% from a year earlier; analysts had expected $778 million.

Chips for mobile and wireless communications were the main drivers of Broadcom's business, with revenue from Bluetooth technology for short-range wireless communications strong as well, said Satya Chillara, a semiconductor analyst with American Technology Research in San Francisco.

"We project Bluetooth revenue of more than $400 million in 2006," he said. "They're doing quite a good job with their revenues."

"Mobile multimedia chipsets are growing rapidly, going into the video iPod, and we think that's quite strong," Chillara said.

For the year, Broadcom earned $412 million, or $1.10 a share, up 88% from $219 million, or 63 cents, in 2004. Revenue rose 11.3% to $2.67 billion.

"Trends in communications and convergence provided a one-two punch that drove Broadcom to record levels of revenue, net income and cash," Chief Executive Scott McGregor said in a statement.

Broadcom is well positioned to benefit, McGregor said.

"The migration of cable, satellite, telephone, cellular, enterprise and even home networks to handle voice, video and data is happening today," he said.

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