On Oct. 23, communications chip maker Broadcom (NASDAQ:BRCM) released third-quarter earnings for the period ended Sept. 30, 2007.
- Operating income dropped 97% to a mere $1.5 million -- mostly because the research and development budget increased by 29% while sales only grew 5.2%. A technology business can commit worse crimes in this Fool's book than investing in R&D.
- The bottom line was rescued from the Red Ink Sea by the balance sheet. The strong and debt-free cash balance generated $31.4 million in net interest income.
- As shocking as these numbers may look when compared to the year-ago period, it's simply the logical continuation of a broader trend. Fellow Fool Dave Mock can explain it in plain English.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q3 2007 |
Q3 2006 |
Change | |
|---|---|---|---|
|
Sales |
$950.0 |
$902.6 |
5.2% |
|
Net Profit |
$27.8 |
$110.2 |
(74.8%) |
|
EPS |
$0.05 |
$0.19 |
(73.7%) |
|
Diluted Shares |
577.6 |
572.6 |
0.9% |
Get back to basics with the income statement.
Margin Checkup
|
Q3 2007 |
Q3 2006 |
Change* | |
|---|---|---|---|
|
Gross Margin |
51%% |
50.1% |
0.8 |
|
Operating Margin |
0.2% |
6%% |
(5.9) |
|
Net Margin |
2.9% |
12.2% |
(9.3) |
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$2,346.1 |
$2,377.2 |
(1.3%) |
|
Accounts Rec. |
$395.7 |
$424.3 |
(6.7%) |
|
Inventory |
$213.2 |
$223.5 |
(4.6%) |
|
Liabilities |
Q3 2007 |
Q3 2006 |
Change |
|---|---|---|---|
|
Accounts Payable |
$349.8 |
$240.4 |
45.5% |
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q3 2007 |
Q3 2006 |
Change | |
|---|---|---|---|
|
Cash From Ops. |
$211.9 |
$229.9 |
(7.8%) |
|
Capital Expenditures |
$15.9 |
$19.9 |
(20%) |
|
Free Cash Flow |
$195.9 |
$209.9 |
(6.7%) |
|
$38.9 |
$104.8 |
(62.9%) |
Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap |
P/E Ratio |
CAPS Rating | |
|---|---|---|---|
|
Intel (NASDAQ:INTC) |
$150,026 |
24.2 |
*** |
|
Texas Instruments (NYSE:TXN) |
$44,007 |
18.5 |
**** |
|
Broadcom |
$18,750 |
80.5 |
**** |
|
Marvell Technology Group (NASDAQ:MRVL) |
$10,001 |
N/A |
**** |
|
Conexant Systems (NASDAQ:CNXT) |
$633 |
N/A |
**** |
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