Broadcom (BRCM), chip maker for mobile instruments, provided positive revenue outlook for the first quarter resulting in the stock advancing more than 2.5 percent in the extended hours trading. The company's earnings and revenues for the fourth quarter came in above Street estimations.
The company also indicated its key focus to be product innovation besides engineering execution to position itself for a faster growth. The growth of smart phones in the developed markets and 3G in the emerging markets provide enough room for innovation as well as growth prospects.
Q4 Results
The Irvine, California-based Broadcom reported net income that slipped 4.5 percent to $254 million or 45 cents a share from $266 million or 47 cents a share in the year-ago quarter. Excluding items, adjusted earnings would have been 68 cents a share for the latest quarter.
Total net revenues slipped 7 percent to $1.82 billion from $1.76 billion in the previous year quarter. Of this, product revenue accounted for $1.76 billion, 6.6 percent down from $1.89 billion in the year earlier quarter.
On an average, analysts had earnings estimation of 65 cents a share on revenues of $1.8 billion.
Product margins slackened to 49.32 percent from 49.44 percent in the year-ago quarter. Sequentially, product margins dipped from 50.95 percent in the third quarter. Operating margin improved year-over-year to 12.64 percent from 11.22 percent, but skid from 13.8 percent in the third quarter.
Moving ahead, Broadcom expects total net revenues to be $1.7 - $1.8 billion for the first quarter. The company also expects to maintain product gross margin at the fourth quarter level. Street analysts' predict the company to generate revenues of $1.73 billion for the first quarter.
Competitors
Among others in the industry, the Qualcomm will report its first quarter earnings results on February 1 after the market closes. The company had earlier guided adjusted earnings between 86 cents a share and 92 cents a share for the first quarter. Revenue was targeted in the range of $4.35 billion – $4.75 billion. Analysts' are expecting earnings of 90 cents a share on revenues of $4.57 billion.
Our Take
The company's revenues for first quarter might come above expectations. But it needs to improve its product margins as well as operating margins. None-the-less, the outlook and its earnings above expectations provide scope for the stock to appreciate.
