AVGO

Avago Technologies Limited (AVGO)

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Avago Technologies Limited (AVGO)

F1Q12 Earnings Call

February 22, 2012, 5:00 p.m. ET

Executives

Thomas Krause – VP, Corporate Development

Hock Tan – President CEO

Doug Bettinger – SVP, CFO

Analysts

Romit Shah – Nomura Securities

John Pitzer (Patrick) – Credit Suisse

Blayne Curtis – Barclays Capital

Edward Snyder – Charter Equity Research

Terence Whalen – Citigroup

Joanne Feeney – Longbow Research

Mark Lipacis – Jefferies

Aalok Shah – DA Davidson

Ian Ing – Lazard Capital Markets

Brendan Furlong – Miller Tabak

Presentation

Operator

Good day ladies and gentlemen, and welcome to the first quarter 2012 Avago Technologies Limited Earnings Conference Call. My name is Alishia and I will be your operator for today. At this time, all participants are on a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions).

I would like to turn the call over to Mr. Tom Krause, Vice President, Corporate Development. Please proceed.

Thomas Krause

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 first quarter and fiscal year 2012. If you did not receive a copy, you may obtain the information from the Investor section of Avago’s website at avagotech.com. This conference call is being webcast live and a recording will be available via telephone playback for one week. It will also be archived in the Investor section of our website at avagotech.com.

During the prepared comments section of this call, Hock and Doug will be providing details of our Q1 fiscal year 2012 results, background to our Q2 2012 outlook, and some commentary regarding the business environment. We will take questions after the end of our prepared comments.

In addition to US GAAP reporting, Avago reports certain financial measures on a non-GAAP basis, a reconciliation between GAAP and non-GAAP measures is included in the tables attached to today’s 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 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. Hock?

Hock Tan

Thank you, Tom. Good afternoon, everyone. I’m going to start today by reviewing some of the recent – some of our recent business highlights, and then Doug will provide summary on the first quarter financial results.

Now as you may have seen from our earnings announcement just out, revenue for the quarter of Q1 fiscal ’12, was at the top end of our guidance at $563 million, down 10% from last quarter, but up 2% year-on-year from the first quarter 2011.

Now results for our wireless communication end market came in much stronger than normal seasonality, and our wide infrastructure, wireline markets, was basically holding up in line with expectations.


The gains is fairly favorable to end markets, however, we saw – we experienced a rather down industrial end market. Now generally, [inaudible] conditions have the biggest impact on industrial market. In particular, we are seeing industrial spending in China continuing to be weak, and that has also continued to impact demand from our industrial OEM customers worldwide.

As we have also discussed previously, we also have seen the impact from the flooding in Thailand, which had exacerbated our ability to ship our industrial products last quarter. But as we see here today, I feel demand for our product has stabilized in this industrial segment, and in some situations may actually be recovering. However, we forecast to that some spending uncertainty remains, especially in Europe and in emerging economies.

In summary, we now believe our industrial business has bottomed but we only see limited signs of a recovery.

So now let’s turn to results from each of our targeted markets. We think our wireless communications targeted market, as you know, we manufacture FBAR Duplexers, Power Amplifiers, some light and proximity sensors and optical navigation devices for feature rich and smart mobile phones. We also produce RF components for wireless Base Stations.

Sales, from our wireless communication targeted market represented 45% of our first quarter revenues, and our revenue from this market declined 2% from the preceding quarter, but rose 26% above Q1 last year.

Now to remind everyone, seasonality in wireless for us typically means revenue decline in the low double-digit on a percentage basis in Q1, but we obviously showed much stronger than typical seasonality – seasonal performance, and there’s a good reason for that. We have been, and will remain focused on picking programs where we can insert content, products with high content that is very differentiated from more standard commodity light products.

Lately we saw the benefits of picking the right programs this particular quarter, and frankly, we would have grown sequentially in RF if not for our OSM and Base Station component business been down.

Looking ahead to the second quarter, fiscal 2012, we expect this momentum to carry in to what would have been another typically weak seasonal quarter. As a result, we expect overall wireless revenue to be slightly up compared to Q1.

Next, within wide infrastructure, as also you may know, we design high-speed SerDes ASICs, as well as produce optical transceivers for enterprise networking, data centers, switching, and high-speed computing applications.

Read the rest of this transcript for free on seekingalpha.com