Broadcom's Brutal Blueprints: Fool by Numbers
By
Anders Bylund
October 24, 2007
|
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)
|
*Expressed in percentage points.
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%)
|
|
Owner Earnings
|
$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
|
****
|
Using the latest reported numbers from Capital IQ. Nobody is anybody without some context.
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