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Broadcom Corporation (NASDAQ:BRCM)

J.P. Morgan Global Technology, Media and Telecom Conference Call

May 21, 2014 8:00 AM ET


Scott A. McGregor – President and Chief Executive Officer


Harlan L. Sur – JPMorgan Securities LLC

Harlan L. Sur – JPMorgan Securities LLC

Right, good morning. Why don’t we go ahead and get started. My name is Harlan Sur, Semiconductor and Semiconductor Capital Equipment Analyst here at JPMorgan. And we are very pleased to have Scott McGregor, President and Chief Executive Officer at Broadcom here with us this morning to kickoff today’s keynotes. What I have asked Scott to do is just start off with a brief overview of Broadcom and a summary of the team’s performance in 2013 and here in 2014, and then he and I will discuss the team’s initiative to drive growth and maintaining their leadership position in their core markets of networking, broadband and wireless segments of the market.

So with that Scott, thank you very much for joining us this morning.

Scott A. McGregor

Thanks Harlan and thank you all for joining us today. Broadcom is a leader in the communications semiconductor market and we think of our business as all about encoding information, transmitting information and decoding information. All of our business is tied together on that theme. The Company is organized into three portfolios of businesses, one that covers the Home, okay so various access methods to get to the Home, getting content into the Home, transmitting it around the Home.

We have another business we call the Hand which is a wireless infrastructure and then we have an Infrastructure business which you can think of as the plumbing of the Internet where we cover everything in data centers and even long line optical networks and those things.

So those are the three core businesses of the company, looking into each of those over the last year, they have all made significant progress in each of the areas. In the Home business, Broadcom has become the number one market share leader for all of the last mile technologies. So whether it’s satellite or DSL or optical or cable or whatever, anyway of getting information into a home of business Broadcom has really focused on the technology and become number one in that. So as bandwidth and connectivity go up, that is a positive sign for our business.

We think of our business in the Home, as primarily focused on set-top box and access. So set up boxes, if you have a set-top box in your house, cable set-top box, satellite set-top box, it probably has Broadcom chips in it. Very, very good position there and we benefit from a number of things; one is the increasing penetration of the high-end technologies 4K, 2K, new technologies in that space.

And also geographic expansion, Broadcom has traditionally been in the United States and to some extent in Europe. And we are now seeing the rest of the world move towards these kinds of architectures and it’s an opportunity for us.

We also have the access business, which is everything from fiber and DSLAMs and DSL and all the different ways, you connect to the different devices. And so very good penetration, especially good geographical penetration in countries like China, for example, which is doing quite widespread increase in broadband penetration into those population.

So those businesses all going very strong, last year in 2013, that business did extremely well. It grew quite profitable, against a pure set of competitors that in aggregate decline year-over-year. So very good market share gains last year and good proposition in terms of where we are on financials in that group.

The Infrastructure group, think of this as sort of the stuff you don’t see as a consumer. It’s all the stuff that makes the Internet actually work. We have a statistic that we like which is that 99.98% of all Internet traffic goes across Broadcom chips, at least one Broadcom chip. And so that shows the pervasiveness we have in all of the switches in the world and all of the optical connections, cellular backhaul all these different things are in that group, providing the plumbing of the Internet, if you will.

And that group has done extremely well, good growth last year, double-digit growth last year, double-digit growth the previous year, probably double-digit growth again this year. All of those things showing good strength in that group. We continue to execute extremely well in that team, winning pretty much the majority of the designs in the spaces they compete. And with the ability to increase the footprint of that business in a number of areas, and I will get to that later in the discussion.

The wireless group, covers primarily two areas, it covers connectivity, think of that as Bluetooth, Wi-Fi combos, GPS, NFC, those kinds of connectivity technologies, where Broadcom has a number one market share. We are in most of the high-end smartphones on the planet, with basically best-in-class technology on that.

And then our new entry into cellular basebands where we have a relatively small market share today, but some excellent technology. And our goal there is to become a major player in that space in the baseband space for cellulars smartphones. So that is a rough overview of the business and Harlan.

Harlan L. Sur – JPMorgan Securities LLC

Great, again Scott thanks for joining us this morning. Why don’t we start up with your networking business, it’s the highest profitability business for the team. As you mentioned you are a clear number one mostly all of the segments that you compete in. The team is doing this business double-digit percentage points top line over the past few years and the team is expecting another year of double-digits growth this year.

And the business has been driving roughly 35% operating margin, profitability over the past few quarters, so sort of near-term and long-term in the Q1 you saw growth in a while this infrastructure market, you are tried in two switch platform continues to crush it out in the broadband and data center markets. Discuss the drivers of the businesses as we move through the year and help us understand what product or end-market segments are going to be the main drivers of the double-digit growth target this year. And then let’s lookout over the next few years and talk about some of the growth drivers there.

Scott A. McGregor

So the infrastructure business is a pretty likable business, as you point out. It does have a good growth track record, double-digit CAGR here, and quite good operating margins. So excellent, excellent business and that team I think has done a great job on execution. The growth has driven certain number of things, one is in the switch area, we have actually continued to take share on that space, and there are a number of smaller customers and we continue to gain some share there.

But there is another factor going on which is that a lot of our customers have historically use ASICs, for how they do switches, and we’ve talked about this for a number of years that we expected a transition from ASIC to merchant silicon. And we’ve been seeing that happening now over the years and we see that continuing over the next few years. As the merchant silicon that we create our solutions are often better or complementary to what one of our customers might do.

So we moved from where some customers might do their own things, two customers now partnering with us for a mix of merchant and ASICs where they look for like a piece of the solution that differentiate them rather than trying to do the whole thing themselves. And so that’s a significant market opportunity in that space. We’ve seen a number of other sort of demographic things happening, one is the whole notion of just a data bandwidth going up across the world, and we believe that’s going to continue.

There are a lot of countries now that are putting infrastructure in place. I think U.S. and Europe are no longer the growth drivers for that we’re seeing where the rest of the world driving it. China in particular driving that because they are deploying a large number of cellular base stations for an LTE rollout. Typically what we see is they will put in either a large set of base stations in communities or they put in broadband in the communities.

And then afterwards once the data traffic starts to pickup and they need to add additional data centers, additional racks. And things like that, so we see a subsequent way of after the initial deployment in those.

We also were penetrating more of the cellular infrastructure in this business, so over the last few years we put together pretty much most of the pieces of cellular infrastructure so we put together the switching piece of it, which we’ve been strong in.

Starting to put together the cellular backhaul, so this is how does it get from the base station back to the Internet. And it’s typically done even by fiber, for high speed when you can and when fiber isn’t convenient or physically possible they use microwave. And so we acquired a microwave backhaul team not too long ago and we believe we are now the number one merchant microwave backhaul solution for these base stations. So you can mount it upon a building sometimes just use a microwave length back to some place else rather than trying to string fiber wherever they need to go.

We expect to continue to increase our portion in all of the cellular infrastructure so some market share growth opportunity there. Then there are other areas that we are getting into, Ethernet is a core strength of the company and we maybe observation that Ethernet is perfectly suitable for automotive. And today if you look in a car, the way most cars are hooked up the cameras, all the other high speed devices are connected with a very expensive proprietary coax cable, with expensive silicon devices and switches and things like that.

We are able to take a single twisted pair of Ethernet, so imagine just a single pair of telephone wire and replace all the expensive coax, all the expensive connectors, and let it 10 times the speed; half the cost, 10 times the speed, half the weight. So for the automative guys that’s a pretty and an open standard. So for a automotive guys that’s a pretty good solution, BMW was one of the early adopters of that. We are now shipping in the BMW X5, out there today and we believe a large number of auto manufacturers will roll that out over the coming years.

So not a business it’s going to start off initially quickly. But believe over time that we’ll see most automotive manufacturers migrate to that technology. So a lot of interesting things going on in our Infrastructure group.

Harlan L. Sur – JPMorgan Securities LLC

Over the past couple of years, the team has inorganically and organically developed a product solution multicore processor product solution targeted for various segments of the market, give us an update there and give us some indications of how that business has trended let’s see over the past 12 months or so, and what are the growth prospects of multicore on a go forward basis.

Scott A. McGregor

In our Infrastructure business, we see multicore processors providing an important role and we did an acquisition of NetLogic, number of years ago in order to get very excellent capabilities in the multiprocessor space for Infrastructure. And a reason that’s important is that these days in the networking side you want to have what I call, network processors that look at the data traffic that goes by, and they do a variety of things by looking at the data traffic.

One of these they can preferentially route high priority traffic, so for example, video signals need to go with a certain rate otherwise you will exceed the signal pixelate or you will drop a frame or something like that and your video picture is impaired. So video traffic needs to go at a certain rate whereas data traffic can go sort of whenever. And the traffic caught for that is very important.

So looking at the traffic and prioritizing it was become more important recently is something called deep-packet inspection, which means that or DPI as it is known in the industry, as a packet goes by on the Internet you want to look at it and figure out whether it’s bad traffic. Is it a virus? Is it somebody trying to hack into a system? Is it something that you want to route somewhere else or do more analysis on? And so the challenge is, these switches run at extremely high speed.

These are switching terabits per second in real time and what we want to be able to do is to look at that traffic that’s going by, and figuring out where do you want to take actions on the nature of the traffic, because it’s a threat or otherwise. And so, it requires that you should put very, very fast processors that can analyze the traffic in real time because you don’t want to slow it down going across.

So we created a set of products there that do deep-packet inspection alongside our switches very synergistic with our switches. Now, an interesting observation is that these processors that look at the traffic for analysis, also good at running applications. And there is a new concept that’s being thought about in data centers these days, called NFV, which stands for network function virtualization, that’s just a fancy word for you get to do multiple things with the same processors.

So you could either do deep-packet inspection or you could run your enterprise application. And if you got all these processors out there, why not have flexibility so that if there is very heavy traffic going by that do DPI, otherwise they go run your payroll. Okay. And having that flexibility of moving things around is very important.

So we’ve designed an architecture that allows us to do that and this is where our leadership switch architecture with now extremely strong processor architecture is a real advantage for us in that space. And again we don’t have a lot of products out in the market today on this, but I think it’s a trend. We’ve made investments to have a strong position in that space and I think over the next five years that will become an important business for us.

Harlan L. Sur – JPMorgan Securities LLC

Actually the last topic that you brought up, which is NFV, leads kind of into my next question, which is that we understand that the Broadcom team is working on a multicore ARM-based 40 nanometer processor solution, several class performance packed with networking functions like deep-packet inspection, among other capabilities, to support initiatives like NFV, like Open Compute Project with the idea to give users the ability to forgo sort of traditional close and sort of proprietary networking switching platforms, obviously building on the expertise you acquired from the NetLogic team. We understand this is being targeted for 2016. Can you just give us a bit more details on some of these initiatives?

Scott A. McGregor

Well, we generally at Broadcom don’t talk about products and so we shift them. But we have talked about some of these initiatives. We’re partnering closely. We spoke with the open computing platform that they have there. They selected us as one of their key partners going forward. We have a variety of other initiatives there. We are making a big investment in the space and we believe it’s quite promising.

We believe that a lot of customers, especially ones who are doing cloud data centers and especially ones who are doing very, very high-performance processing, for example, on Wall Street where they’re trying to look at real-time events, analysis for trading platforms algorithm we are trading other kinds of things. These are very suited to these kinds of devices and we’re partnering with a number of the key players and drivers there and we’re getting very, very good response on this.

Harlan L. Sur – JPMorgan Securities LLC

Great. I think a good sort of reflection of the success in Broadcom’s networking business is sort of the transformation in end market over time. So if I look back at your business, 10 years ago it was probably 90% enterprise and 10%, let’s say, service provider. Give us a snapshot of your business today, enterprise, service provider and data center.

Scott A. McGregor

So I would say that enterprise still is a very important business for us. Service provider and data center have become the largest factors for us in that business. Service providers, as we talk about the LTE roll out and cellular infrastructure side driving a lot there, but also the tradition with telcos, just really driving broadband capabilities and it’s kind of interesting for us as we read about all of these M&A transactions swirling around about satellite guys being bought by telephone guys and so forth.

For us that’s overall interesting because they’re all our customers and for us it’s exciting because we know one of the driving forces behind a lot of that M&A is that people want to provide complete solutions to customers that include satellite as well as landline as well as cellular connections as a complete package to those customers and that plays very well to the kind of solutions that we offer in all those spaces. So that’s exciting.

We haven’t seen our enterprise business shrink, but on the other hand the other two businesses, the data center and the infrastructure side service provider is really outgrowing it and at this point over the last year we’ve seen them as the primary driver of our business.

Harlan L. Sur – JPMorgan Securities LLC

Great. Let’s move over to the broadband segment of your business where the team has a leadership position in obviously the advanced set-top solutions market as well as broadband access. You’re saying this segment grew 3% last year. It was 6% in 2012. It generates a very healthy 23% to 25% operating margin profitability. How should we think about the prospects for growth and profitability here in 2014 and over the next few years and help us understand some of the drivers in the business?

One other things that comes to my mind for example is to move by your customers to enable an IP based connected home architecture here in the U.S., but would love to get your thoughts?

Scott A. McGregor

Our broadband business is a very steady, solid business. It’s probably more of a mid-single digit grower than a double-digit grower. It does occasionally grow double-digits in some years, but probably has a mid-single digit CAGR if you model it. The business has just executed superbly. I think on the stake that a lot of people make when they look at that business is they try to model the business going forward on the basis of U.S. subscriber growth, okay trends and that's one of the factor, but it misses a lot of other things.

For example, we upgrade the boxes and there is a lot of churn in the base as people move from SD to HD, now to UltraHD. So new technologies like HEVC enable twice the bandwidth signals in the same amount of spectrum that they have on the cable, which means if you’re cable company we can go to them and say you could double the number of channels, existing channels or you could compress your existing channels down into half of what you use today and free up a whole lot of extra spectrum now to start offering UltraHD channels 4Kx2K which is interesting to most of these guys.

So, it gives us a way to continue adapt new technologies. We’ve done a good job in terms of making sure that we have good set-top box solutions across all the different ways you would connect. So that includes satellite set-top boxes number one market share, cable set-top boxes number one market share, fiber-based or DSL based set-top boxes number one share and over the top set-top boxes number one share.

So we are agnostic about how is the data delivered and we focus on creating that. Now in the home, we see a trend towards a number of different things. One trend is that people are trying to move the technology that does the constant protection and final decode closer to the TV, okay in terms of dongles and things like that. There is a wonderful new product out from Roku, which is the streaming stick, which is an HDMI Dongle which just fits right into your TV and provides over-the-top capabilities there. That’s an example of moving it all the way to the TV and then over-the-top model.

And then, we see what a lot of other companies were doing in the cable space of trying to create a more powerful home gateway that provides all of your video services, that provides all of your internet services for your house or small business as well as the ability to remotely watch or record devices in one place, start watching in your living room and you will finish watching it in the bedroom or something like that.

So we’re seeing quite a range of experimentation of these different categories of boxes and I think we’ve been extremely good at providing the full range of technology all the way down from a very small streaming Roku stick all the way up to a very high-end box that you might see from a Time Warner or an XFINITY from Comcast or something like that. So a good range of products there.

Harlan L. Sur

Great. One other questions that has come up recently given all of that and you actually mentioned this, and my previous question is the consolidation that’s happening within the service provider market. So for example, consolidation DirecTV and AT&T just announced yesterday for example, I know that the team via your set-top box SoC leadership basically owns all of the silicon content at DirecTV. I’m not as familiar as your penetration with AT&T, but as more of this consolidation happens, this has end up being a good thing for Broadcom?

Scott A. McGregor

I think it’s a good thing for Broadcom because what it does in the motivation for a lot of these consolidations is, there is a lot of duplication of R&D, and different methods for how they get the content in the home. A lot of these guys are looking at this as a way to not only get synergies in terms of putting the teams together, but in terms of being able to offer their customers a complete package of all these different technologies and it leads towards more consolidation of technologies into the home. It plays very well for us. So it tends to favor the silicon providers who can provide more complete solutions and that would be us.

Harlan L. Sur – JPMorgan Securities LLC

I see and you mentioned emerging markets as a potential opportunity. Talk to us about some of the geographies you feel sort of over the next sort of one to three years that represent potentially low hanging fruits and big market share gain opportunities for Broadcom.

Scott A. McGregor

Broadcom historically has not played in this space in South America or in South Asia or many other parts of the world Eastern Europe because in the past a lot of the devices used in those countries were very low end boxes that didn’t have much content protection. Generally the government would transmit a small number of signals or do some commercial things, but there wasn’t value in protecting content.

What’s completely changed is that many of those countries have now upgraded they want to move to HD and in many cases all the way UltraHD on these devices. They now have content, they want to protect and I will give you a good example there is Brazil. Brazil is a country right now which is very excited to have not only the World Cup Soccer competition, but also the Olympics coming out. And so the World Cup Soccer will be reported and transmitted in 4Kx2K or UltraHD video quality.

They also want to make sure that by the time the Olympics rolls out, that a reasonable number of their citizens will also be able to watch that on 4Kx2K sets and so they are upgrading the entire country infrastructure all the way to UltraHD and so moving from what used to be sort of a sub standard HD kind of architecture all the way to what any of these U.S. companies would be proud of to deploy in the next few years.

All at one go. And so for us it means we move from practically a 0% market share in Brazil to an extremely higher percent market share in Brazil over a relatively short period of time so the geographic gain there.

We are seeing similar things happening in Russia, Eastern Europe, in Africa both in the Middle East and also in South Africa, a lot of things driven there. There is a lot of cable boxes in those countries all upgrading to new technologies that are applicable to us and so an opportunity for share gain for Broadcom in those business.

Harlan L. Sur – JPMorgan Securities LLC

Great, why don’t we turn to your mobile and wireless business. It’s a $4 billion business I know that. I and a lot of the investors out there in the audience have a lot of questions in your baseband segment which we’ll get to in a second, but my estimate is that 80% to 85% of this $4 billion business is connectivity. We all know that Broadcom has a leadership position in the connectivity markets, let’s start there, talk to us about the leadership position, talk to us about the growth opportunities outside of mobile devices for the connectivity business and the growth prospects for that on a go-forward basis.

Scott A. McGregor

We think of our wireless business has really two businesses. There is our connectivity business which is number one market share, best-in class technology, very strong leadership position basically in every major smartphone today, every high-end smartphone today. And then we have our baseband business and our goal has been to get into all of the devices in the phone. And we put together a strategy that says we are going to go after all the different pieces of the phone except for perhaps memory and things like that which are much more commoditized.

From a financial perspective it is a tale of two cities, we have a very profitable, very strong combo business, and we’ve been making a very large investments in the baseband business. And to-date the return has been disappointing. We have not yet seen profitability in that group and we have not yet gotten the traction that we hope in that group.

We are looking at the baseband business in terms of a number of factors. And as I mentioned on our last earnings call, we evaluate that group in terms of product and technology. We have a number of milestones for the group in that category, in terms of customer traction. And then a derivative function, which is commercial success. And we look at those three, I would say where are we on those three, in terms of product, results and technology results we’re doing extremely well.

We made our milestones. We hit our tape-out dates. Our products are performing. We mentioned some new technologies that we’re rolling out over the course of this year which are capabilities in the cellphone space that, no one else including the entrenched guys have announced such as Cat 9, Cat 10 high speed 450 megabits, 300 megabits per second. Download speeds 100 megabit per second, upload speeds as well as very fast multiprocessors.

So from a technology side, I feel pretty good about it. I think the challenges on the customer and the commercial side; I’d say year-to-date results are mixed. We did an impairment in our first quarter related to some of the Renesas acquisitions which was due to a slower than expected adoption rate of our LTE modems, in the early part of the year which had an automatic accounting implication on that.

So right now, we’re continuing to look at those milestones. Let me be very clear that I have not and will not move the milestones or hopeless on this. We’re going to hope the group accountable to achieving the things we setup and we told people about last December Analyst Day and our goal and our strategy is to make a big success with baseband and to get a significant launch in terms of revenue, would add billions of dollars to our top line. But look if we can’t achieve the customer or the commercial side, we are not going to keep doing it.

Harlan L. Sur – JPMorgan Securities LLC

So to that point, one of the sort of near, to mid-term metric that the team is put out there as it relates to near-term customer traction is obviously we know that you are lead customer on your initial 4G platforms has been Samsung and you rolled out with a couple of smartphone models and we all know in the smartphone business that, you have to have bigger footprint of smartphones, and it’s really the consumer that decides success of the smartphone model or not.

And unfortunately that fell a bit short in the first half of the year, but in their earnings call the team did seem more confident about achieving more volume in revenue scale in the second half. And so the question to you is what is driving that confidence about a bigger book of 4G business in the second half of the year. Is it Samsung with more models? Is it new customers with other models, and literally a month away from Q3? So what’s the confidence level about the second half outlook for the 4G business?

Scott A. McGregor

When we acquired the Renesas technology, one of things that came with that was a design win with Samsung. And the good news for us is that it meant that we had the largest maker of smartphones using the product when we acquired it. So it gave us some confidence that we can go forward with that and Samsung has retained a very high interest in using that. They did rollout on initial model with that.

One of the challenges for us is they said well, now that you guys have it, will you please add the following features to it. And then we’ll hold off all the other models and so you get that done. So that was why we saw a relatively soft adoption in the first half because they’re very excited about us adding just a few more features to rollout additional models. There are additional models planned in the latter half of this year and that will comprise the bulk of the revenue we have this year in smartphones and LTE from our partner, a customer there.

So that’s why you see more confidence towards the second half of that year. Those chips are done and it’s a matter of when they rollout and we’re going to be a little reserve in terms of what and when – that Samsung’s business, we don’t share their information.

Harlan L. Sur – JPMorgan Securities LLC


Scott A. McGregor

But as those devices rollout, you’ll see them in the marketplace and that’s what’s really driving our expectations for. As I said in the past, nine figures worth of revenue in that space. It will obviously depend on the commercial factors and whether they are build successfully. So it depends on the second half performance, but our forecast is still to achieve in the order of $100 million of revenue from those products.

Harlan L. Sur – JPMorgan Securities LLC

Great. When I have discussions with investors one of the things that always comes up is how should we think about the timeframe associated with the team achieving some of these 4G metrics and the team being in a position to make a strategic decision. And so the way that I want to ask this question to you is, I’m not asking you to quantify for us the timeframe, but if I think about what you just said, the team should have a good indication of your design win and revenue traction with your dual-core and quad-core solution in the second half of this year, certainly exiting the second half of this year.

As it relates to your advanced products, some of your Cat-6, Cat-9, Cat-10 products, you seem to indicate that the team should get good feedback from your customers as it relates to potential design win opportunities in 2015 and beyond towards the end of this year. So it seems like all of the indicators and all of the metrics that the team is focused on to be able to make a decision, the team should be in a position to be able to do that either end of this year or beginning of next year. Is that a fair assumption?

Scott A. McGregor

In our conference call, I said that we expect to see feedback from our customers in terms of design wins over the next few quarters, possibly sooner. So I think that the team has done a fantastic job creating these technologies and it’s a bit like we have a storefront and we have beautiful products in the window and now over the next couple of quarters, possibly sooner, those customers are going to tell us whether they like the products or not and that’s the gating item at this point.

It’s not we’re not going to wait for even more new products. The products are in the window now and now we need to get the feedback from the customers or these products that they want to buy. And in order to make a goal of this business you can’t just have like a couple of small customers.

The economics of having thousands of engineers working on this, say, you need to have pretty significant customer interest. But we are engaged with all those customers. We know them well. We’ve been having discussions with them for a while. And as I look at that we’ll see those results again over the next couple of quarters and possibly sooner. We won’t wait if a customer say they aren’t interested in them or they don’t see them in next year’s line up or something like that. We don’t need to wait a couple of quarters. We could make a decision relatively quickly. On the other hand if they’re saying, wow, these are great products, we need to slot you into these line ups. So we want to do this. We’ll play that out over the longer.

Harlan L. Sur – JPMorgan Securities LLC

Okay, great. And then, let’s focus on the subject of return of capital to shareholders and obviously shareholder returns has been a big topic of the investors as well, especially given the performance of the stock over the past 18 months. The team has about $5 billion of cash in the balance sheet and I think the market is perplexed as to why the team is not stepping up to buy the stock. If you remain confident on the overall strategy, the networking business is doing extremely well. The broadband business is number one in all of its segments with a lot of growth drivers there. Setting aside the baseband business your connectivity business is number one and continues to do well. So help us understand the repurchase program and why or why not the team may or may not be get more aggressive on that as we move forward here.

Scott A. McGregor

Sure. And Broadcom has committed to repurchase least enough shares to offset our SVC and we’ve engaged in a dividend program where our goal is to steadily grow the dividend over time. We have some limitations in terms of our U.S. cash level. About 30%, 40% of our cash generated is U.S cash. The rest is offshore. We have opportunities to bring cash onshore from time to time. Last year, 2013, we spent and returned to shareholders more than 100% of our U.S. cash, okay, and our dividend is currently at about 50% of our U.S. cash generation and we look at the rest for share buybacks.

We were disappointed that we weren’t able to buy shares in the first quarter of this year. And as we said on the call, there are various reasons why companies may not be able to buy shares. But we did say that it’s our hope to be in the market this quarter. And I will give you an update on that at our earnings call for the end of the second quarter.

Harlan L. Sur – JPMorgan Securities LLC

Great. Well, we look forward to continuing to monitor the progress of Broadcom, as we move through the year, and, Scott, I want to thank you very much for joining us this morning.

Scott A. McGregor

Thanks, Harlan.

Harlan L. Sur – JPMorgan Securities LLC


Question-and-Answer Session

[No Q&A session for this event]

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