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Broadcom earnings report propels stock in after-hours trading

The Irvine chip maker says its quarterly sales of $1.8 billion represent a 13% jump from a year earlier, and its per-share profit beats analyst expectations.

July 26, 2011|By David Sarno, Los Angeles Times

Broadcom Corp. posted better-than-expected quarterly sales and predicted growing demand for its microchips used in smartphones and tablet computers — possibly including Apple Inc.'s next iPhone.

Shares in the Irvine chip maker shot up more than 8.3% in after-hours trading Monday, to $37.80 a share, as the company said its quarterly sales of $1.8 billion represented a 13% jump from the same period last year. Its per-share earnings of 72 cents, though slightly less than the 74 cents from a year earlier, still beat Wall Street analysts' expectations by almost 10 cents.

It was the first time this year that the stock had traded up following an earnings release, after enduring hefty sell-offs in February and April. At the close of regular trading Monday, the stock was down nearly 20% so far this year.

The company said it expected double-digit growth in sales of chips for smartphones and tablet computers in the current quarter as more of its communications technology is used in popular consumer electronics, including Apple's iPhones and iPads, Android smartphones and the Nintendo Wii.

"They've got a better outlook than most companies right now," said Aalok Shah, an analyst at D.A. Davidson & Co. "There are new tablets coming to the market, back-to-school season is starting, and we know the iPhone 5 is still out there," he added, referring to the yet-unannounced new version of Apple's popular handset, widely believed to be coming in August or September.

Broadcom said that it expected revenue of close to $2 billion for the current quarter and that sales would rise in all of its nearly 20 business lines. The company makes chips for a wide variety of consumer and business devices, including cable boxes, Internet servers and Blu-ray players.

Broadcom also said it expected its chips to power more of the smartphones selling in China, the world's largest consumer technology market. In addition to higher-end devices like the iPhone, Broadcom has said it is aiming at customers interested in less expensive Android smartphones — more stripped down than phones such as the HTC Evo or Motorola Droid line but a step above the previous generation of feature-poor "dumbphones."

"As smartphones based on Android hit new low cost points, we think it will really drive volume," Broadcom Chief Executive Scott McGregor said. "That's both a China phenomenon and an outside-of-China phenomenon."

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