Foolish Forecast: Broadcom Stages an Encore
It's almost time to get the first-quarter 2008 earnings report from communications chip maker Broadcom (Nasdaq: BRCM). Ahead of today's post-bell release, here's what we can expect from the broadband silicon wonder.
What analysts say:
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Buy, sell, or waffle? Twenty-five analysts weigh in on Broadcom, with 17 maintaining a buy rating and eight saying hold. Broadcom has a three-star rating (out of five), with more than 600 opinions in the Motley Fool CAPS community.
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Revenue. The average analyst is expecting quarterly revenue of $992 million, 10% higher than the same quarter last year.
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Earnings. The average expectation for net earnings this quarter is $0.28 per share.
What management says:
Last quarter, Broadcom overcame what I thought was a certain drag on its earnings -- Motorola's (NYSE: MOT) lost market share. CEO Scott McGregor and his team proved me wrong, and even delivered expanded margins on strength from enterprise and wireless products thanks to other top-tier customers such as Nokia (NYSE: NOK) and Cisco (Nasdaq: CSCO).
Cutting back on spending has also helped boost the company's bottom line. McGregor noted last quarter that "while Broadcom will continue to invest to bring these and other new products to market, we have tightened our processes and made additional strategic portfolio management decisions in the fourth quarter to help moderate expense growth across 2008."
What management does:
With the cutback in spending, Broadcom reversed the trend of declining margins occurring over the last several quarters.
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Margin
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9/06
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12/06
|
03/07
|
06/07
|
09/07
|
12/07
|
|
Gross
|
51.8%
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51.0%
|
51.1%
|
51.1%
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51.3%
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51.5%
|
|
Operating
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11.4%
|
6.8%
|
4.9%
|
2.9%
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1.6%
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2.7%
|
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Net
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14.6%
|
10.3%
|
8.8%
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6.9%
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4.6%
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5.6%
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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
The new challenge facing Broadcom is the larger economy that has already put the sting on outlook from competitors and customers such as Texas Instruments (NYSE: TXN) and Nokia. Ongoing litigation with Qualcomm (Nasdaq: QCOM) is still a wild card, though Broadcom has little to lose there except millions spent on legal efforts.
The larger economy and conditions of its peers may make last quarter's performance tough to follow. I would expect Broadcom to post strong results but -- like most others reporting recently -- give a weak or cloudy picture for the balance of 2008. But I've been known to be wrong before.
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