Broadcom Corporation (BRCM) generated revenues of $1.82 billion in the first quarter of 2011, up 24.2% year over year but down 6.6% sequentially. The results were within management’s guidance of $1.75 billion – $1.85 billion and surpassed the Zacks Consensus Estimate of $1.81 billion.
In terms of end-markets, the Broadband Communications segment recorded a 15% sequential decline as expected by management due to excess channel inventory.
Growth in this segment will be driven by the continued expansion of pay-TV and Internet access services internationally, especially in China and India. Surging demand for online video content also continues to drive growth in next generation, high-speed modems utilizing DOCSIS 3.0, VDSL and PON access technology.
In addition, demand for greater bandwidth throughout in the domestic sphere will drive adoption of Gigabit Ethernet 802.11n, MoCA and power line high-speed home networking technology.
The Infrastructure business witnessed a sequential growth of 2%, attributed to record sales of switches. Broadcom continues to see strength in its Switching portfolio from adoption of new products, service provider packet transport and broadband rollouts and the increased adoption of 10-gigabit in the Data Center.
Revenue from service provider solutions, including China deployments, increased in the March period as operators globally migrate to Ethernet backhaul over traditional time division multiplexing networks.
The Mobile & Wireless segment registered a 6% sequential decline as strength in wireless connectivity solutions was offset by weakness in cellular products.
Licensing business was up in the quarter, driven by an IP sale.
On a product basis, product revenue grew 24.8% year over year to $1.75 billion. Income from the Qualcomm agreement was $51.7 million. License revenues doubled year over year to $12.0 million.
Margins: Gross margin declined to 50.7%, down 20 basis points from the previous quarter. Product gross margin decreased sequentially to 48.9% from 49.4% in the previous quarter, primarily due to acquisition charges.
Broadcom’s net income came in at $228 million or $0.40 per share compared to a net income of $210 million or $0.40 per share in the year-ago quarter. This easily beat the Zacks Consensus Estimate of $0.35.
Balance sheet: During the quarter, Broadcom generated $334 million of cash from operations and used $45.0 million for capital expenditures. Accounts receivable days sales outstanding were 38 days, flat with the previous quarter.
Broadcom returned a record $470 million in capital to shareholders in the quarter in the form of dividends and share repurchases. Broadcom ended the quarter with cash and equivalents of $1.6 billion, almost flat with the year-ago quarter.
Guidance: For the second quarter of 2011, Broadcom projects revenues around $1.75 billion – $1.85 billion, flat with the previous quarter. Revenue from Broadband Communications segment is expected to be up as inventory correction is almost over.
Revenue from Mobile & Wireless segment is expected to be down in the second quarter due to market softness at some of the key customers. Revenues from Infrastructure & Networking sales are expected to be flat to slightly down.
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