Has the semiconductor industry just turned a corner?
Broadcom (Nasdaq: BRCM) is sending signals to that effect. The stock jumped as much as 11% overnight on a terrific second-quarter report wherein CEO Scott McGregor highlighted "strong demand for our communications solutions." Positive signals, indeed.
Sales increased by 12% year-over-year to $1.8 billion, producing $418 million or $0.72 per share in non-GAAP earnings and $489 million of operating cash flows. Analysts would have settled for earnings of $0.63 per share.
Gross margins widened more than expected, mostly thanks to cost savings on the manufacturing side of things. Operating expenses swelled a little bit, unless you take out a one-time $25 million legal settlement expense (in which case, costs would go down).
The only real disappointment in Broadcom's report came from declining sales in the mobile division, driven by "some softness at a number of key customers." That's a nice way of pointing fingers at flagging phone phenom Nokia (NYSE: NOK), where Broadcom sends large volumes of 2G radio chips today and will start selling 3G chips next year.
But McGregor also dodged a question on how Apple's (Nasdaq: AAPL) iPhone success contributes to Broadcom's results when he said, "We certainly see growth in a broad range of customers and not any one specific customer." All told, he expects the mobile segment to bounce back in the next quarter.
Broadcom's good news failed to light a fire under the general semiconductor market; ON Semiconductor (Nasdaq: ONNN) and Marvell Technology (Nasdaq: MRVL) are trading up a few percent but chip titans Qualcomm (Nasdaq: QCOM) and Intel (Nasdaq: INTC) are in line with the overall market. That doesn't make sense to me, because I think Broadcom just showed what's next -- a sharp rebound from a short downturn.
Do you see a semiconductor revival in Broadcom's report or just a bright future for the company itself? My tea leaves are leaning toward the former scenario. To make sure you're on top of everything that's happening to the company, add Broadcom to your Foolish watchlist by clicking here, then drop down to the comments box to make your informed opinion known.
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