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Broadcom Q4 Earnings Surpass Estimates

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Leading semiconductor manufacturer Broadcom Corp. reported GAAP net income of $168 million or 29 cents per share in fourth quarter 2013 versus $251 million or 43 cents in the year-ago quarter. The year-over-year decrease in earnings was primarily attributable to lower revenues and high operating expenses.

Non-GAAP net income stood at $366 million or 60 cents per share in the reported quarter compared with $462 million or 76 cents per share in the year-earlier quarter. Despite the year-over-year decrease, adjusted earnings comprehensively beat the Zacks Consensus Estimate of 38 cents.

For full year 2013, GAAP net income was $424 million or 73 cents per share compared with $719 million or $1.25 in the prior year. Non-GAAP net income for 2013 was $1.7 billion or $2.72 per share compared with $1.8 billion or $2.92 per share in the year-ago period. Adjusted earnings for full year 2013 were well ahead of the Zacks Consensus Estimate of $1.84.


Revenues for fourth quarter 2013 were $2,064 million, down 0.8% year over year and above the Zacks Consensus Estimate of $2,028 million. For full year 2013, Broadcom reported revenues of $8,305 million, significantly up from $8,006 million in the previous year.

In terms of end markets, Broadband Communications revenues declined 3% on a sequential basis to $548 million. Mobile & Wireless segment revenues decreased 7% sequentially to $940 million. Revenues from Infrastructure & Networking segment were up 2% on a sequential basis to $576 million, driven by higher sales of Ethernet switches and physical layer devices (PHYs).


GAAP product margin for the reported quarter improved to 50.3% from 49.7% in the prior-year quarter. Non-GAAP product gross margin was up marginally to 52.6%.

In order to streamline its costs and better align its resources as per strategic priorities, Broadcom initiated a global restructuring plan during the reported quarter. This includes retrenchment of up to 1,150 employees. Broadcom recorded restructuring costs of $17 million in the fourth quarter of 2013 in accordance with the plan and anticipates recording approximately $5 million in the next quarter.

Balance Sheet/Cash Flow

Broadcom generated $1,785 million in cash from operations in 2013 compared with $1,931 million in the previous year. The company ended the year with cash and cash equivalents of $1,657 million, down from $1,617 million at year-end 2012. Long-term debt at year-end 2013 remained flat year over year at $1.4 billion.


Concurrent with the earnings release, management provided its guidance for first quarter 2014. Total revenue is expected to be within $1.9 billion and $2.0 billion. Product gross margin on a GAAP basis is expected to be down 100 basis points to 150 basis points sequentially in the first quarter of 2014. Research & development and selling, general, and administrative expenses (GAAP) are expected to be up $20 million to $40 million sequentially.

Broadcom expects a steady momentum in broadband in the coming quarters, driven by emerging market penetration and new technology adoption in developed markets. The company intends to deliver healthy LTE (Long Term Evolution) revenues in 2014, while focusing on data center innovation and next generation home video products with HEVC (High Efficiency Video Coding).

Broadcom presently has a Zacks Rank #1 (Strong Buy). Other notable companies in the sector that are worth mentioning include Montage Technology Group Limited , NXP Semiconductors NV (NXPI - Free Report) and ON Semiconductor Corp. , each carrying a Zacks Rank #2 (Buy).

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