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Broadcom Corp. (BRCM - Analyst Report) reported GAAP net income of $ 251 million or 43 cents per share versus a net income of $254 million or 45 cents in the year-ago quarter. The year-over-year decrease in earnings was due to higher expenses. For 2012, GAAP net income stood at $1.25 per share versus $1.65 in the previous year.

Non-GAAP net income stood at 76 cents per share in fourth quarter 2012 compared to 68 cents in the year-ago quarter. The adjusted quarterly earnings beat the Zacks Consensus Estimate by 24 cents. For full year 2012, non-GAAP net income was $2.92 per share versus $2.89 per share in the prior year.  The fiscal earnings beat the Zacks Consensus Estimate of $2.01.

The company generated revenues of $2.08 billion in the fourth quarter of 2012, up 14.3% year over year and ahead of the Zacks Consensus Estimate of $2.06 billion. Net revenue for full year 2012 was $8.01 billion, up 8.4% year over year.

In terms of end markets, Broadband Communications revenues were up 1.0% sequentially, driven by growth in set-top boxes. Mobile & Wireless segment revenues decreased 1% sequentially to $1.01 billion. Revenues from Infrastructure & Networking segment decreased 8.5% sequentially, driven by broad-based softness across all its product categories.

On a product basis, product revenues came in at $2.0 billion in fourth quarter 2012.  Income from the Qualcomm agreement came in at $43 million in fourth quarter versus $52 million in the year-ago quarter. License revenues stood at $9 million versus $ 5 million in the year-ago quarter.


Non-GAAP product gross margin was up to 52.2% in fourth quarter 2012 from 50.5% in the year ago quarter while GAAP product margin came in at 49.5%, up from 49.3% in the year-ago quarter.

The company reported research and development expenses of $590 million in fourth quarter 2012 compared to $479 million in the prior-year quarter.

Balance Sheet

Broadcom generated $593 million in cash from operations in fourth quarter 2012 and $1.9 billion for the full year. The company increased its quarterly cash dividend by 10% to 11 cents per share. Broadcom ended 2012 with cash and equivalents of $1.6 billion, down from $4.1 billion at the end of the previous year.


Concurrent with the earnings release, management provided its guidance for first quarter 2013. Infrastructure revenues are expected to be down sequentially due to the ongoing softness across the market segments. Mobile & Wireless segment is also expected to decline due to seasonality in the first quarter. Broadcom expects revenues to be $1.90 billion in first quarter 2013.

The company expects product gross margin on a GAAP basis as well as on a non-GAAP basis be flat to down 50 basis points sequentially in the first quarter of 2013.

On a GAAP basis, research & development and selling, general, and administrative expenses are expected to be up $35 million - $50 million sequentially.

At the same time, the company needs to be wary of its competitors, which include formidable names such as Juniper Networks, Inc (JNPR - Analyst Report) and SanDisk Corp (SNDK - Analyst Report).
Broadcom Corp currently has a Zacks Rank #2 (Buy). One of its competitors, QUALCOMM Incorporated (QCOM - Analyst Report) also carries a Zacks Rank #2 (Buy).

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