Broadcom Beats Q2 Estimates Thanks to Leaner Business Model

Communications chip designer Broadcom shut down an unprofitable legacy division in the second quarter, helping the company beat earnings estimates.

Anders Bylund
Anders Bylund
Jul 22, 2014 at 5:50PM
Technology and Telecom

A Broadcom-powered wireless charging station. Source: Broadcom.

Broadcom (UNKNOWN:BRCM.DL) shares jumped as much as 3.9% higher after Tuesday's closing bell, following the release of strong second-quarter results.

The designer of communications-focused semiconductors saw sales decline 2% year-over-year to $2.0 billion. Adjusted earnings fell 7% to $0.65 per share.

Revenue was in line with analyst estimates, but Street projections called for earnings near $0.61 per share. Broadcom beat the bottom-line consensus target.

Non-GAAP earnings chiefly excluded charges related to stock-based compensation, alongside restructuring costs as Broadcom exited the cellular baseband market.

In prepared remarks, Broadcom CEO Scott McGregor explained how a newfound focus on broadband, connectivity, and infrastructure markets will help. "We will be a stronger company, as gross margins, profitability and cash flows will noticeably improve, providing an opportunity to return more capital to our shareholders," McGregor said.

Broadcom shares have gained 31% year to date and 43% over the past 52 weeks. In after-hours action, the stock reached prices not seen since early 2011.