Broadcom Corporation
(
BRCM
) recently updated its guidance for the fourth quarter of 2012.
The company expects revenues to come between $2.0 billion and
$2.10 billion compared to the previous guidance of $1.95 billion
- $2.10 billion.
The increase in guidance was attributable to slightly
better-than-expected revenue in the Mobile & Wireless
business.
Broadcom now expects product gross margin on a GAAP basis to
increase slightly from 48.8% reported in the third quarter of
2012 as compared to the earlier expectation of being flat to
slightly up.
On a non-GAAP basis as well, product gross margin is projected
to increase slightly from 52.1% reported in the third quarter of
2012 as compared to the earlier expectation of being flat to
slightly up.
On a GAAP basis, research & development and selling,
general, and administrative expenses are expected to be down $5
million - $15 million from the third-quarter level of $648
million. The decrease in guidance was due to lower-than-expected
headcount costs, primarily driven by reduced incentive
compensation, as well as tighter expenses and services
management.
Amidst a weak macro environment, the positive guidance from
Broadcom is quite encouraging. 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 on the look out for more content and bandwidth. The
market for wireless connectivity devices is expected to grow,
driven by increasing demand of smartphones, tablets, netbooks and
digital TVs.
The company currently faces competition from bigwigs like
QUALCOMM Incorporated
(
QCOM
) and
Texas Instrument
(
TXN
). QUALCOMM's operating unit, Qualcomm Technologies, Inc. (QTI)
recently completed the acquisition of EPOS Development, Ltd. In
order to retain its position in the global market, it is
imperative that Broadcom continues to undertake various
initiatives and develop new products, keeping in mind the
betterment of the organization in both the long and short
run.
We currently maintain a 'Neutral' recommendation on Broadcom.
The stock carries a Zacks #3 Rank, translating into a short-term
(1-3 months) 'Hold' rating.
BROADCOM CORP-A (BRCM): Free Stock Analysis
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