Earnings Preview: Broadcom

Broadcom (BRCM) is expected to report Q3 earnings after market close Tuesday Oct. 21, with a conference call scheduled for 4:45 pm ET.

Guidance

The consensus estimate is 44c for EPS and $1.27B for revenue, according to First Call. Company guidance calls for revenues to be up 6.0%, in-line with seasonality, to $1.25B to $1.3B; and pro forma product gross margins to decline by 200bps to 51%.

Analyst Views

Citigroup is forecasting above seasonal strength in Enterprise Networking of $342M (+4.7% QoQ) while the Mobile & Wireless segments ($459M, 11.6% QoQ) and Broadband Communications ($465M, +2.4% QoQ) are modeled below seasonal levels. Citigroup believes its Q3 revenue growth expectations are supported by the company's intra-quarter comments on enterprise switch adoption for GBit Ethernet, continued momentum in WLAN adoption, and seasonal Blu-Ray and DTV uptick. Citigroup recently reducing its 4Q08 and 1Q09 estimates to account for macro weakness in enterprise and consumer spending and component pricing pressures.

The firm is modeling Q4 revenues up 1.6% (vs 4.9% seasonal) for $1.29B, gross margins of 51.3% (-50 bps QoQ), operating margins of 19.4% and proforma EPS of 43c. Citigroup's segment modeling includes sub-seasonal revenue growth for each of the three business segments: Enterprise Networking at $324M, Broadband Communication $451M, and Mobile & Wireless: $512M.

PacCrest is estimating Q3 results of 39c on $1.25b in revenues, below consensus. The firm believes low expectations for Q4 are already priced into the shares, making them set up well after estimate revisions occur. The firm is estimating 35c on $1.24B in revenues for Q4. PacCrest still believes FY09 estimates are too high, but Broadcom has one of the broadest tech portfolios, a solid balance sheet and is a cash generator.