Can Broadcom Survive the Coming Qualcomm-Intel Battle?

Broadcom (NASDAQ: BRCM) will release its quarterly report on Tuesday, and the company has a lot to prove after a crushing blow to its stock after its second-quarter report. Now that Intel (INTC 4.50%) is pushing even harder to make its own mark in the mobile-device chip space, the big question Broadcom faces is whether it will be able to hold off both Intel and Qualcomm (QCOM +0.02%) to retain its own share of the lucrative market.

Broadcom has been a strong long-term play in the networking and mobile-technology space, with its chips doing a better job than many in incorporating multiple features onto single chip designs, such as Wi-Fi connectivity, Bluetooth capabilities, and GPS technology. That has attracted business from major smartphone providers, helping it participate in the huge growth in mobile devices in recent years. But a setback earlier this year as well as major strategic moves from Qualcomm and Intel have many investors questioning Broadcom's future. Let's take an early look at what's been happening with Broadcom over the past quarter and what we're likely to see in its report.

Stats on Broadcom

Source: Yahoo! Finance.

Can Broadcom earnings bounce back this quarter?
In recent months, analysts have gotten much less secure about Broadcom earnings prospects, cutting almost 10% from their third-quarter and full-year 2013 estimates and almost 15% from their 2014 projections. The stock has also sunk, plunging almost 20% since mid-July.

Almost all of that damage came after Broadcom's second-quarter earnings report, which sent the stock down 15% in a single day. Broadcom beat earnings estimates, but poor future guidance raised concerns about whether Broadcom could sustain its growth in light of heightened competition from Qualcomm and Intel. CEO Scott McGregor still believes that it will post "continued growth driven by our industry leading portfolio of wired and wireless communication platforms," but investors remained unconvinced, especially given weak conditions in the smartphone industry at that time. In particular, some feared that Apple would take Broadcom out of its future iPhone designs, citing reports that Apple might bring chip design in-house.

Yet Broadcom has ample opportunity to continue reaping the rewards of its expertise in older, lower-margin devices, especially in areas that don't have more sophisticated wireless network technology in place. Some of Intel's planned offerings are targeting the same lower-end markets as Broadcom, making some worry that the behemoth could end up crowding out its smaller rival. But Broadcom's long history in the space and familiarity with the technology should give it a competitive edge even against the much-larger Intel.

More importantly, Broadcom redoubled its commitment to the high-end market by buying LTE assets from Renesas Electronics last month. The move will threaten Qualcomm's LTE dominance by giving Broadcom an integrated chip with advanced LTE technology that already works with some of the most important mobile carriers in the world. As a result, Broadcom should be able to work quickly to move forward in the space, and while that could hold earnings down in the short run, it could also help Broadcom gain more confidence among investors still shell-shocked from its July plunge.

In the Broadcom earnings report, watch to see how the iPhone 5s/5c launch and reported poor sales of the Galaxy S4 have affected earnings. After such a big drop last quarter, even a somewhat positive report could reassure investors that Intel and Qualcomm won't be able to keep Broadcom down in the long run.

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