Broadcom 2Q Adj. Earnings Beat Comfortably - Analyst Blog

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Leading semiconductor manufacturer Broadcom Corp. ( BRCM ) reported GAAP net loss of $251 million or 43 cents per share in second quarter 2013 versus net income of $160 million or 28 cents in the year-ago quarter. The year-over-year slump in earnings was primarily attributable to an impairment charge of $501 million or 87 cents per share related to the acquisition of NetLogic Microsystems, Inc.

Non-GAAP net income stood at $436 million or 70 cents per share in the reported quarter compared with $435 million or 72 cents in the year-earlier quarter. Despite a year-over-year decrease, the adjusted earnings comprehensively beat the Zacks Consensus Estimate of 49 cents.


Revenues for second quarter 2013 were $2.09 billion, up 6.0% year over year and slightly below the Zacks Consensus Estimate of $2.11 billion. In terms of revenue composition, product revenues came in at $2.035 billion in the reported quarter, while income from the QUALCOMM Incorporated ( QCOM ) agreement came in at $43 million and license revenues stood at $12 million.

In terms of end markets, Broadband Communications revenues were $568 million, up 5% year over year, driven by growth in set-top boxes and broadband modems. Mobile & Wireless segment revenues increased 7% year over year to $967 million due to product innovations, led by technology leadership and new standards like 5G Wi-Fi and Bluetooth Low Energy. Revenues from Infrastructure & Networking segment climbed 7% year over year to $512 million, driven by a growth in large-scale cloud data center build-outs and optical transport networking market.


Non-GAAP product gross margin declined to 51.8% in the reported quarter from 52.2% in the prior-year period. GAAP product margin came in at 49.4%, up from 46.7% in the year-ago quarter. The improvement in gross margin was due to a stronger-than-expected mix in infrastructure networking business, partially offset by increases in non-standard cost, including obsolete inventory.

GAAP research and development and selling, general and administrative expenses were $793 million in second quarter 2013 compared with $753 million in the prior-year quarter.

Balance Sheet/Cash Flow

Broadcom generated $334 million in cash from operations in second quarter 2013. The company ended the quarter with cash and cash equivalents of $1.6 billion and with long-term debt of $1.4 billion.


Concurrent with the earnings release, management provided its guidance for second quarter 2013. Total revenue is expected to be within $2.05 billion and $2.20 billion. Product gross margins on a GAAP as well as on non-GAAP basis are expected to be up 50 basis points sequentially in the third quarter of 2013. Research & development and selling, general, and administrative expenses (non-GAAP) are expected to be flat to up to $20 million sequentially.

Broadcom expects a steady momentum in broadband in the coming quarters, driven by more market penetration in emerging markets and new technology adoption in developed markets. As for the Infrastructure & Networking segment, the company is bullish about the data center market and expects the strength in connectivity solutions in Mobile & Wireless segment to remain intact as well.

Broadcom presently has a Zacks Rank #4 (Sell). Other notable companies in the sector that are worth mentioning include Cypress Semiconductor Corporation ( CY ) and TriQuint Semiconductor, Inc. ( TQNT ), both carrying a Zacks Rank #2 (Buy).

BROADCOM CORP-A (BRCM): Free Stock Analysis Report

CYPRESS SEMICON (CY): Free Stock Analysis Report

QUALCOMM INC (QCOM): Free Stock Analysis Report

TRIQUINT SEMICO (TQNT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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