Broadcom shares fall after profits, recovery of chips may take some time

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Broadcom

Shares fell Friday in pre-market trading, despite exceeding the chip maker's forecast.

The Silicon Valley-based company said demand for chips had bottomed but was unlikely to recover, as the market environment remains difficult.

The story back.

Things have apparently plotted against Broadcom so far this year, as trade tensions between the US and China and a drop in demand for chips have hit society.

Apple

(ticker: AAPL) is Broadcom's biggest customer and accounted for nearly a quarter of the chip maker's business turnover last year, while Huawei accounted for $ 900 million, or 4.3% of the total business figure.

The softer demand from the iPhone and the Trump administration's decision to blacklist Huawei blacklist earlier this year have also hurt the chip maker.

However, equities rose another 18% in 2019 as it continued its long-term strategy to strengthen its infrastructure software business, which helps companies streamline their internal operations through acquisitions.

Last month, Broadcom (AVGO) agreed to buy a cybersecurity company
Symantec

(SYMC) to strengthen the software footprint of its infrastructure.

What's up.

Managing Director Hock Tan said demand for his core semiconductor business had "melted" but would remain at low levels due to the current uncertain situation.

The Silicon Valley-based company has maintained its annual target of $ 22.5 billion in revenue, consisting of $ 17.5 billion in semiconductor solutions and $ 5 billion worth of software. # 39; s infrastructure.

The company said third-quarter net sales rose 9 percent to $ 5.52 billion, according to the FactSet consensus.

Earnings from continuing operations were $ 2.28 billion, or $ 5.16 per share, compared with estimates of more than $ 5.13 per share.

Broadcom shares fell 1% to $ 297.68 to 9:08 of pre-market, while Dow Jones Industrial Average futures advanced 77 points, or 0.3%. The iShares PHLX Semiconductor ETF (SOXX) gained 0.3% to $ 219.72 in trading before the opening.

Moving forward.

Apple's three new iPhones, which the company unveiled earlier this week, will undoubtedly strengthen Broadcom, as will management's claims that weak demand for chips is at an all-time low.

Although demand may not yet recover, the company's infrastructure software strategy means that it is well positioned to grow while the environment remains challenging.