Broadcom Inc. shares closed lower in the last two trading sessions despite reporting its financial results for the fourth quarter above consensus forecast.
The San Jose, California-based semiconductor manufacturer reported a profit of $1.25 billion, or $2.93 per share for the three-month period ended November 1, as compared to $818 million, or $1.97 per share in the same period last year. Excluding certain items, adjusted earnings rose to $6.35 per share, as compared to $5.39 per share in the year-ago quarter.
Revenue for the quarter came in at $6.47 billion, up from $5.78 billion in the comparable period of 2019. Analysts on average were expecting Broadcom to report adjusted profit of $6.25 per share on revenue of $6.43 billion.
Source: Getty Images [CEO Hock Tan]Speaking on the results, CEO Hock Tan said in a statement, “we concluded the year with strong fourth-quarter results driven by continued demand for networking from the cloud and for broadband from service providers as well as the significant ramp in wireless, even as enterprise demand remained soft. Our infrastructure software segment continued to be stable and delivered solid results.”
Revenue from the chip segment came in at $4.83 billion, representing a year-over-year increase of 6 percent. On the other hand, analysts were looking for revenue of $4.81 billion from chip sales. Comparatively, revenue from the infrastructure software segment climbed 36 percent to $1.64 billion in the quarter, beating the consensus forecast of $1.62 billion.
Broadcom also raised its quarterly dividend to $3.60 per share, translating to an increase of 11 percent from the prior dividend.
Looking forward, the company expects revenue of around $6.6 billion for the fiscal first quarter, an increase of 13 percent from the prior quarter. The revenue forecast is also better than the consensus estimates of $6.52 billion in revenue.
Leadership Reshuffled
Broadcom on Thursday announced some changes in its senior leadership. Kirsten Spears is now the new Chief Financial Officer of the company. She was previously working as the Principal Accounting Officer.
The former CFO Tom Krause will now be leading the company’s new Infrastructure Software Group. Krause will be overseeing the software operations, sales, and customer support across the six software divisions of the company.
Broadcom also named Charlie Kawwas as its new Chief Operating Officer. He was previously working on the position of Chief Sales Officer.
Growth Journey
Broadcom has enjoyed tremendous growth in recent years, especially over the past couple of year. It stepped into the infrastructure software market in 2018 by acquiring CA Technologies, besides acquiring Symantec’s enterprise security division last year. It even went to buy Qualcomm but could not succeed as the U.S. government blocked the acquisition over security concerns.
The company’s latest quarterly results indicate improved demand for wireless components from its key supplier Apple Inc, which rolled out its first 5G-enabled iPhone versions in October.
Source: Getty Images
Earlier this year, Broadcom inked a $15 billion supply deal with Apple. It will supply wireless components to the iPhone maker over the next three years, according to the agreement. The company currently generates around 20 percent of its revenue from Apple. However, its dependence on the iPhone maker is expected to go down in the coming time as it inks agreement with more customers that are preparing to switch to the next-generation wireless technology.
The company joined hands with telecom equipment maker Nokia in June to design custom chips for 5G networking gear. The collaboration represents the company’s overall efforts to better compete with rival Marvell and Intel in the 5G components market.
Broadcom also manufactures chips for customers associated to telecommunication, data center, and cloud computing industries. Its chips support higher speeds over wired and wireless networks.
Stock Performance
Broadcom stock started the year at a price of around $315. Its share price touched a low of $167 after the coronavirus outbreak. However, the stock managed to recover its lost value in the subsequent months and surpassed its pre-pandemic price levels. Overall, its share price has increased more than 28 percent on a year-to-date basis.
