Broadcom reported solid first-quarter results and gave investors a second-quarter outlook that was modestly ahead of expectations. Broadcom’s revenue was $2.0 billion, notably ahead the firm’s forecast of $1.90 billion discussed in late January. Sales were down 4% sequentially but up 10% from the year ago quarter.
Broadcom’s wireless chip business was down only 2% sequentially from the seasonally strong March quarter, better than initially anticipated by the company, as Broadcom saw nice sales of 5G WiFi chips in the quarter and may also have received a boost in orders from Samsung ahead of its Galaxy S4 launch in the spring.
Broadband sales were down 4% sequentially due to lower modem shipments in China, while networking chip sales were down 7%, consistent with soft spending from service provider and enterprise customers. Lower sales levels plus Broadcom’s annual increase in fringe benefit and merit costs for employees led to a decline in operating margins to 10%, down from 13% in the December quarter.
Broadcom’s revenue forecast for the June quarter of $2.1 billion would represent a 5% sequential increase. Broadcom expects healthy sales growth across all of its business segments, including wireless baseband chips, where Samsung is a key customer for mid-tier 3G smartphones. The company’s forecast growth in networking chips is promising, given soft demand for equipment from a variety of manufacturers in this end market, but Broadcom is seeing signs of life from enterprise customers that are building out their cloud infrastructures. Meanwhile, analysts still view Broadcom as the premier connectivity chip supplier, and its strength in new technologies like 802.11ac WiFi and Near- Field Communications technologies should serve the firm well as it continues to earn design wins in highly popular smartphone and tablet devices like Apple’s iPhones and iPads.
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