Broadcom Expects Its Earnings to Bounce Back -- Update
13 December 2019 - 11:09AM
Dow Jones News
By Asa Fitch
Broadcom Inc. promised an earnings recovery in the current
financial year after the chip maker posted weaker fourth-quarter
figures, dented by the protracted U.S. export ban of some items to
Chinese telecom giant Huawei Technologies Co.
Broadcom said per-share earnings fell to $1.97 in the final
quarter of the ended Nov. 3, compared with $2.64 a year earlier.
The more closely watched adjusted earnings, which strip out some
one-time items, fell 8% to $5.39 a share, in line with expectations
from analysts surveyed by FactSet.
The company gave an upbeat sales forecast for the financial year
that began last month, after reporting $5.78 billion in revenue for
its most recent quarter. Analysts had expected $5.77 billion. The
company projected growth of about 10% to roughly $25 billion,
compared with 8% sales growth in the year just ended.
Broadcom shares were lower in after-hours trading, after rising
slightly immediately following the release of the results.
Chief Executive Hock Tan said he was optimistic about growth in
the company's core semiconductor business later in its current
fiscal year. The company, he said, would benefit from its recent
acquisition of cybersecurity firm Symantec's enterprise
business.
Broadcom's semiconductor businesses, which account for about
four-fifths of the company's revenue, fell 7% year-to-year in the
fiscal fourth quarter, offset by a strong rise in the company's
software segment. The chip business is likely to improve this
fiscal year, said Mr. Tan said, who promised growth of 7% in sales
of Broadcom's core semiconductor products.
"We continue to believe that our core semiconductor business is
bottoming and will return to year over year growth in the second
half of our fiscal year," he said.
The rollout of 5G communications networks also is likley to
drive growth, Chief Financial Officer Tom Krause said on a call
with analysts. The company's radio-frequency components business,
which had $2.2 billion in sales in the fiscal year just ended, is
likely to grow as smartphone makers boost production of 5G-capable
devices, he said.
Broadcom has come off a tumultuous year, buffeted, in part, by
U.S. trade tensions with China. The company, in June, cut its sales
forecast by $2 billion. . Chinese telecom-equipment maker Huawei
accounted for about $900 million of Broadcom's sales in its
previous fiscal year.
Mr. Tan has been trying to expand Broadcom's reach beyond its
traditional area of providing semiconductors for networking and
wireless chips that go in Wi-Fi routers, smartphones and other
electronics used in homes and factories. Those moves haven't come
without challenges, including the U.S. government's decision to
block Broadcom's acquisition of rival Qualcomm Inc. on
national-security grounds last year.
Broadcom last month said it had completed the $10.7 billion
acquisition of Symantec Corp.'s enterprise security business, first
announced in August. That transaction followed last year's $19
billion deal to buy software firm CA Technologies, formerly
Computer Associates.
Broadcom is also under investigation by European anticompetition
authorities for allegedly trying to use its dominant position as a
supplier of television set-top boxes and other electronics to edge
out competition. The company called the inquiry meritless and said
it didn't expect any major business impact.
The chip maker also faces new competition from Cisco Systems
Inc., which sells networking equipment. Cisco said this week that
it was getting into the business of selling chips for
cloud-computing operators, putting it in direct competition with
Broadcom.
"The fact that Cisco has joined it in our view validates the
model, the trend we're pushing, and it's great to see that we're
right in that regard," Mr. Tan said. "We welcome the
competition."
Broadcom also said it was looking to pay down $4 billion of debt
during the year after borrowing to finance recent acquisitions.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
December 12, 2019 18:54 ET (23:54 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Broadcom (NASDAQ:AVGO)
Historical Stock Chart
From Mar 2024 to Apr 2024
Broadcom (NASDAQ:AVGO)
Historical Stock Chart
From Apr 2023 to Apr 2024