Broadcom Corp.(BRCM) yesterday raised its guidance for the fourth quarter of fiscal 2009.
The company now expects revenues to increase 5% on a sequential basis to $1.32 billion, up from the prior guidance of $1.25 billion. We had earlier observed that Broadcom was being conservative on its guidance. The company earlier stated that due to the uncertain economic situation it remains cautious about the business prospects. Consumer demand remains uncertain as well due the upcoming holiday season. Revenues were expected to be flat on a sequential basis from each of the target markets.
Management now states that the increase in guidance reflects stronger than expected demand for products in Broadband and Enterprise Networking markets, much ahead of company’s expectations. According to the latest updates from Semiconductor Industry Association (SIA), demand has indeed improved in the second half of 2009 and chip sales are on the rise.
The company now expects product gross margin to improve by 100 basispoints on a sequential basis. Gross margin was earlier estimated to improve by 20 to 50 basis points driven by improvements in cost and mix. In October, the company reported better-than-expected results for the third quarter driven by broad- based growth which in turn was led by a return to normal order patterns from customers and a number of new product ramps.
Broadcom, being a market leader, is expected to seize a major chunk of the increase in demand.
Broadcom’s prospect of growth continues to outpace its peers, given its leading ability to integrate communications and processing in both current and emerging markets.
Our long-term recommendation for Broadcom is neutral, which means the stock will perform in line with the broader market.
California-based Broadcom is a leading chipmaker of products used in wired and wireless communications.
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