SAN FRANCISCO—Broadcom Corp. Tuesday (Oct. 25) became the latest chip vendor to predict a fourth quarter sales decline, as the company turned in a third quarter performance in line with analysts' expectations but called for lower than expected fourth quarter revenue.
Broadcom (Irvine, Calif.) reported third quarter sales of $1.96 billion, an all-time quarterly high for the company. Sales improved by and 8.9 percent compared to the second quarter and by 8.4 percent compared to the third quarter of 2010, Broadcom said.
Broadcom posted net income in accordance with generally accepted accounting principles (GAAP) of $270 million, or 48 cents per share, up from $175 million in the previous quarter but down compared to $328 million in the third quarter of 2010.
On a non-GAAP basis, excluding charges, Broadcom reported a third quarter net income of $476 million, or 82 cents per share, up from $418 million in the second quarter and $456 million in the third quarter of 2010.
Broadcom's third quarter results came in above consensus analysts' expectations, which called for sales of $1.95 billion and non-GAAP earnings of 76 cents per share, according to Yahoo Finance.
But like many chip companies in recent weeks, Broadcom said it expects sales to decline in the fourth quarter. The company forecasted that sales in the fourth quarter would slip to between $1.7 billion and $1.8 million, well below the $2.1 billion forecasted on average by analysts, according to Yahoo Finance.
"While our outlook reflects potential industry softness, our long-term strategy is to continue to outgrow the overall semiconductor market with product innovations that drive new market growth and value," said Scott McGregor, Broadcom's president and CEO, in a statement.
Craig Berger, an analyst with FBR Capital Markets, said in a report circulated Wednesday that while Broadcom's fourth quarter outlook came in lower than expected, the company may be better positioned than peers to weather the downturn. While many peer companies will see two quarters of revenue declines totaling about 15 to 18 percent, Broadcom could see one or one-and-a-half quarters of revenue declines totaling 9 to 13 percent, Berger said.
"While we still hear of strength with Apple and in smartphone connectivity shipments, Samsung is a likely 4Q11 drag for Broadcom, and customers globally are actively depleting inventories given macro weakness," Berger said.
Berger said he and fellow FBR analysts believe that Broadcom is positioned to one day be the second largest supplier of baseband ICs, behind Qualcomm Inc.