Broadcom Guidance Sinks Shares

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Broadcom Corp. (NASDAQ: BRCM) reported third quarter 2013 results after markets closed on Tuesday. For the quarter, the semiconductor maker posted adjusted diluted earnings per share (EPS) of $0.76 on revenues of $2.15 billion. In the same period a year ago, the company reported EPS of $0.79 on revenues of $2.09 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.69 EPS and $2.13 billion in revenues.

On a GAAP basis, Broadcom reported quarterly diluted EPS of $0.55, compared with EPS of $0.38 in the same period last year. GAAP net income included a one-time gain of $75 million, a charitable contribution of $25 million and $12 million in restructuring charges.

The company’s CEO said:

Looking forward, we are taking the necessary steps to tightly manage the business while focusing on strategic initiatives, including LTE, data center innovation and driving the next generation of home video with HEVC [high-efficiency video coding].

For the fourth quarter of the 2013 fiscal year, Broadcom expects revenue of $1.975 billion, plus or minus 3% and gross margins down in a range of 0.5% to 1% compared with the third quarter. The consensus estimate calls for fourth quarter EPS of $0.59 on revenues of $2.13 billion. For the full year, the consensus estimate calls for EPS of $2.62 on revenues of $8.36 billion.

Broadcom’s fourth-quarter forecast will cancel the top and bottom line beats the company posted for the third quarter. Lower pricing for high-end mobile devices from all manufacturers has taken a particular toll on Broadcom. Shares are down nearly 20% over the past 12 months, while peers like Qualcomm Corp. (NASDAQ: QCOM), Texas Instruments Inc. (NASDAQ: TXN), and Nvidia Corp. (NASDAQ: NVDA) are up around 17%, 45%, and 30%, respectively.

Broadcom shares are trading down about 6.6% at $25.35 in after-hours trading Tuesday, in a 52-week range of $23.25 to $37.85. Thomson Reuters had a consensus analyst price target of around $32.60 before today’s report.