[ad_1]
Outside this area, Broadcom (AVGO – Get Report) sees trade tensions and related customer inventory reductions weigh heavily on its short-term chip sales.
On Thursday afternoon, Broadcom announced a business turnover of 5.52 billion USD for the quarter of April (second fiscal quarter) and a non-GAAP earnings per share of 5.21 USD. Revenues, up 10% year-over-year from the CA Technologies acquisition last November, missed analysts' consensus estimate of $ 5.68 billion. EPS, which benefited from $ 1.33 billion in spending and share buybacks, exceeded consensus by $ 5.19.
More importantly perhaps, Broadcom has reduced its revenue forecast for the 2019 fiscal year (ends in October 2019) from $ 2 billion to $ 22.5 billion. The consensus of analysts was $ 24.3 billion.
Broadcom's shares ended down 8.5% after 25 hours, reaching $ 257.70, thus wiping out most of their gains in 2019. Numerous other chip developers, including Skyworks (SWKS – Get Report), Qorvo (QRVO – Get Report), NXP Semiconductors (NXPI – Get Report) and Qualcomm (QCOM – Get Report), followed Broadcom Lower and the Philadelphia Semiconductor Index (SOXX – Get Report) dropped 1.9 %. Apple (AAPL – Get Report), the largest client for Broadcom wireless smart cards, is down 0.6%.
Here are some highlights of Broadcom's report and call for results:
1. Broadcom is now more distressed by the demand for chips in the second half
Fully responsible for reducing Broadcom 's sales forecast: the company is now expecting its Semiconductor Solutions business to post a $ 17.5 billion business turnover for the first time. fiscal year 2019, down from $ 19.5 billion previously forecast. In its report, Broadcom said chip customers "were actively reducing their inventories," the trade tensions and import bans recently imposed on Huawei making them more cautious.
During the conference call, CEO Hock Tan revealed that Huawei accounted for $ 900 million of Broadcom's business figure for fiscal year 2018, and that weak demand from its business had begun to appear. see close to the beginning of the current quarter after the announcement of Huawei's ban mid-May. On the other hand, he noted that end-user end-product demand for Broadcom products remains stable in North America and Europe and that, if demand continues in a few months, Broadcom's lost sales in Huawei would be offset by higher sales to others. OEMs.
During the April quarter, Semiconductor Solutions' revenue fell 10 percent a year to $ 4.09 billion, thus missing the consensus of $ 4.19 billion.
2. Sales of networking chips are an asset
Despite the reduction in forecasts, Broadcom still expects its network business – products such as Ethernet switch and connectivity chips, packet processors, optical components, and ASICs to accelerate intelligence workloads. artificial, network, video and security – grow at an accelerated pace. Double digit clip during the 2019 fiscal year.
Tan said Broadcom sees strong product cycles for recently launched switching and routing chips, as well as the dynamism of cloud giants for its various computing offload ASICs. In comments that Nvidia (NVDA – Get Report) will probably have no objection to make, Tan said that accelerators could account for up to 25% of IT spending in major cloud data centers in the world. to next 5 years.
Apple and Nvidia are stakes in Jim Cramer Action Alerts PLUS club member. Do you want to be alerted before Jim Cramer buys or sells AAPL or NVDA? Learn more now
3. Sales of wireless chips are still weak
Tan said that Broadcom's wireless chip sales covered products such as RF, Wi-Fi / Bluetooth, and wireless charging chips, and were under pressure from weak smartphone demand and loss. RF share of Qorvo within the Apple iPhone 2018 range, as expected) a "sharp decline" in the last quarter. He added (before the expected rise in sales related to Apple's 2019 iPhone launches) that, like other chip companies, Broadcom's wireless business is affected by a uncertain demand environment.
On the positive side, Tan, whose company recently signed a new 2-year supply agreement with Apple, said Broadcom was expecting a growth of its RF content per device from about 5% to 10% in average over the next two to three years. . Moreover, following Qualcomm's signature of a multi-year chip supply contract with Apple, which could include selling 5G RF front-end chips for millimeter-wave radios, Tan insisted that RF technology Broadcom remained unequaled.
4. CA continues to perform well
Although the prospects for Semiconductor Solutions have been reduced and the demand for storage switching is changing, Broadcom has maintained its revenue forecast for the 2019 fiscal year of its Infrastructure Software segment, which covers software development activities. Broadcom (formerly Brocade) CA and storage switching business, at $ 5 billion. The segment had sales of $ 1.41 billion for the April quarter, slightly above the consensus of $ 1.37 billion.
Tan, who previously announced that CA's sales efforts will focus on selling "at will" licensing contracts to large companies, said CA had recorded a "significant increase in reservation dollars" thanks to the strong renewal activity. More than 20 major renewal contracts were signed during the first six months following the closing of the CA acquisition, he said, and more is expected over the next six months.
5. Financial performance remains strong
Last Quarter Earnings Per Share Improved: Broadcom's non-GAAP operating expenses were $ 1.02 billion, down $ 59 million sequentially and (despite the impact of the year-over-year period). CA agreement) up only $ 135 million a year.
Another advantage: Broadcom's gross margin (GM) increased 0.6 percentage points sequentially to 72%, despite a 5% drop in revenue. On an annual basis, GM grew by 5.4 points, thanks to the contract with CA and cost reductions.
Although its revenue forecast for fiscal year was reduced by $ 2 billion, Broadcom is raising its operating margin forecast by 1.5 points to 52.5%. Chief Financial Officer Tom Krause said Broadcom was expecting free cash flow of $ 9 billion for the full year, after accounting for $ 1.1 billion of "restructuring and integration charges."
6. Broadcom remains "very active" in evaluating M & A on-chip opportunities
At the last call of the Broadcom results, Tan said that his company, which has bought many companies in recent years, is open to new acquisitions of chips. And while trade tensions have sparked concerns over China's approval of deals involving US suitors, he said in Broadcom's latest call that the company "should[continues] be very interested in the opportunities that may arise "and is always" very active in evaluating these opportunities ".
[ad_2]
Source link