Avago Technologies Limited (AVGO)
F3Q2011 Earnings Call
August 23, 2011 5:00 pm ET
Jacob Sayer – VP of Business Development and IR
Hock Tan – President and CEO
Douglas Bettinger – CFO
Terence Whalen – Citi
Ross Seymore – Deutsche Bank
Vank Nathamuni [ph] – JP Morgan
Blain Curtis – Barclays
John Pitzer – Credit Suisse
Vijay Rakesh – Sterne Agee
Brendan Furlong – Miller Tabak
Sanjay Devgan – Morgan Stanley
Aalok Shah – D.A. Davidson
Rafi Hassan [ph] – Jefferies
Mike Burton – Kaufman Bros.
Edward Snyder – Charter Equity Research
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Thank you, operator, and good afternoon, everyone. Joining me today are Hock Tan, President and CEO; and Doug Bettinger, Chief Financial Officer of Avago Technologies.
After the market closed today, Avago distributed a press release and financial tables describing our financial performance for the third quarter of fiscal year 2011. If you did not receive a copy, you may obtain the information from the investors section of Avago's website at avagotech.com.
This conference call is being web cast live and a recording will be available via telephone playback for one week. During the prepared comments section of this call, Hock and Doug will be providing details of our Q3 fiscal year 2011 results, background to our Q4 2011 outlook, and some commentary regarding the business environment. We will take questions after the end of our prepared comments.
In addition to U.S. GAAP reporting, Avago reports certain financial measures on a non-GAAP basis, to provide it in addition to and not as a substitute for the comparable GAAP measures.
A reconciliation between GAAP and non-GAAP financials is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results.
Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could affect our business and financial condition and cause our actual results to differ materially from the forward-looking statements made on this call.
At this time, I would like to turn the call over to Hock Tan. Hock?
Thank you Jacob. Good afternoon, everyone. I'm going to start today by reviewing some of the recent business highlights, and then Doug will provide a summary of the third quarter financial results.
As you may have seen from our earnings announcement, revenue for the quarter was at the top end of our guidance at a record 603 million with net revenue up 8% from last quarter and up 10% year-on-year from third quarter 2010.
Interestingly though, each of our target markets performed much as we guided during the course of – in the third fiscal quarter. Now there is little doubt that there exists today uncertainty with regard to the direction of the global economy, the electronics equipment supply chain will undoubtedly be adversely affected, probably has been by any economic downturn with semiconductors at the tail end of this chain, which could obviously have knock-on effects for our business.
Nonetheless, we have continued to gain traction with our large OEM customers and largely as a consequence, we continue to expect to see our business grow through the balance of this fiscal year.
Now let us turn to the results from each of our target markets. Within our wireless communications market, we manufacture as you may know, FBAR duplexers, power amplifiers, light and proximity sensors, and optical navigation devices for feature-rich and smart mobile phones. We also manufacture RF components for the wireless base station market.
Turning to fiscal Q3, sales from our wireless communications market represented 37% of our third quarter revenues. Our revenue from this target market grew 10% from the preceding quarter, and rose 8% above the same quarter last year. This performance was roughly in line with our expectations for the quarter. Growth in Q3 was driven by increased strength in our wireless infrastructure business and by the seasonal growth in handsets driven particularly by the launch of new LTE and WiMax smart phones in North America.
This was offset somewhat by weakness with a large OEM in the optical finger navigation product line. We continue to be encouraged by our momentum as our parts were designed into 37 new handset platforms during Q3. I have to add that our best – while it is of interest to note I should say that our business model in wireless is predicated upon certain handset OEMs pushing for differentiated performance, which we can deliver through our components.
Obviously our success in this segment is based on those OEMs being winners in the marketplace. We believe we have recently been successful with those winners. As a result, we anticipate revenue in this target market will again increase in the high single to low double digits compared to Q3 as those winning OEMs launch their next generation smart phones.
Turning to wired infrastructure, as you may know too, we design high speed SerDes ASICs and manufacture Optical Transceivers for enterprise networking, data center switching and high speed computing applications. Now revenue from the wired infrastructure market represented 28% of our total Q3 sales. Our sales from the wired infrastructure market grew 6% over Q2 and grew 37% over the same quarter last year.