SAN FRANCISCO A Wall Street analyst who last week said Broadcom Corp. has secured a socket in Apple's forthcoming cellular handset downgraded Broadcom's stock rating to "neutral" from "buy" Thursday (Nov. 30).
Citing more conservative growth expectations for wireless handset, set-top box and server/storage IC sales, UBS Securities LLC analyst Alex Gauna said his firm has reduced projections for Broadcom's 2008 revenue by $200 million to $4.3 billion. Gauna reduced UBS' price target on Broadcom's stock to $38 from $45.
In a research note, Gauna gave Broadcom credit for the potential to generate $300 million in wireless IC revenue in 2006. But, we wrote, "We simply have not seen enough tangible evidence of 3G progress to be any more optimistic in this category."
Gauana said UBS expects Broadcom (Irvine, Calif.) to benefit from xDSL and cable set-top box inventory correction rebounds, content ramp in the Apple phone, Bluetooth share gains at Nokia, and WiFi and Bluetooth exposure from Nintendo's Wii gaming console. But, he said, his firm believes WiFi trends are generally lackluster, Bluetooth pressure exists at lead customer Motorola, and the IPTV STB market is ramping without them.
Gauna said UBS believes shares of Broadcom will "struggle to generate sustained upside in coming quarters," even with positive news releases likely to originate at the Consumer Electronics Show, MacWorld and upcoming wireless tradeshows.
Last week, Gauna said he believes that Broadcom scored a meaningful design win with inclusion in the forthcoming Apple handset. Apple has yet to confirm speculation, supported by recent patent applications, that the company is developing a mobile phone product. But Chris Caso, an analyst with Friedman, Billings, Ramsey & Co. Inc., said last week that he expects Apple to announce the expected product, dubbed "iPhone" by analysts, in the first quarter of 2007.