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Sep. 11, 2015, 5:16 PM
- "We remain bullish on AVGO and expect the stock to sustain its outperformance driven by multiple self-help levers, which could result in $15 in EPS by CY18 (25% growth, 70% self-help levers)," writes RBC's Amit Daryanani after talking with management. He reiterates an Outperform and $150 target.
- Daryanani: "Key takeaways: 1) Wireless growth is constrained by 100% capacity utilization as current/future customers want more allocation of FBAR [filters]; 2) While content is stable with large OEMs, it’s expected we see double digit (we think 20-30%+ conservatively) growth in next gen product (Fall-2016), 3) BRCM [acquisition] on schedule to close early 2016, keep an eye on MOFCOM deadlines in late-September; and 4) Positive [hard drive] comments on conference call were reflective of PCs & enterprise.”
- Strong iPhone 6-related demand and broader RF content share gains (fueled by FBAR-related sales for 4G phones) helped Avago's wireless revenue rise 69% Y/Y in the July quarter. With the iPhone 6 launch approaching its 1-year anniversary, Y/Y comps are set to get tougher.
- Avago rose 1.8% in regular trading; Broadcom rose 1.2%. Though down 13% from a spring high of $150.50 (hit amid Broadcom deal euphoria), Avago remains up 31% YTD, and has handily outperformed the Philadelphia Semi Index. Broadcom is up 23% YTD.
Aug. 26, 2015, 4:44 PM
- Avago (NASDAQ:AVGO) has guided for FQ4 revenue of $1.85B (+/- $25M), slightly below a $1.86B consensus at the midpoint. However, expectations were relatively low, given the soft guidance many chipmakers have provided in July/August.
- Segment performance: FQ3 wireless communications revenue (RF components, boosted by iPhone growth and 4G-driven share gains) rose 7% Q/Q and 69% Y/Y, and made up 35% of revenue. Enterprise storage (boosted by the Emulex acquisition) rose 26% Q/Q and 46% Y/Y, and was 34% of revenue. Wired infrastructure fell 3% Q/Q and rose 7% Y/Y, and was 21% of revenue. Industrial/other fell 21% Q/Q and rose 2% Y/Y, and was 10% of revenue.
- Financials: Gross margin was 61%, flat Q/Q and up 400 bps, and above a guidance midpoint of 60%. FQ4 GM guidance is at 60.5% (+/- 1%). M&A-related cost cuts resulted in operating expenses rising only 7% Y/Y to $330M. Avago ended FQ3 with $1.4B in cash, and $3.9B in debt.
- Avago is up 2% after hours to $118.35. Shares rose 7.1% in regular trading ahead of earnings amid a giant market rally. Merger partner Broadcom (NASDAQ:BRCM) rose 5.6%.
- FQ3 results, PR
Aug. 13, 2015, 12:53 PM
- Broadcom (NASDAQ:BRCM) declares $0.14/share quarterly dividend, in line with previous.
- Forward yield 1.09%
- Payable Sept. 14; for shareholders of record Aug. 28; ex-div Aug. 26.
Aug. 6, 2015, 9:53 AM
- Qualcomm (QCOM -0.5%), via its Atheros Wi-Fi/connectivity chip unit, is buying DSL modem/infrastructure IC and home gateway processor vendor Ikanos (NASDAQ:IKAN) for $2.75/share, or roughly $47M based on Ikanos' Q2 diluted share count. The price represents a 57% premium to Ikanos' Wednesday close. The deal is expected to close by year's end.
- Ikanos' products complement Qualcomm/Atheros home Wi-Fi and wireline networking offerings. Qualcomm: "The combination of Qualcomm Atheros' broad home gateway IP portfolio, including Wi-Fi, powerline, small cell, and Ethernet switch technologies, and Ikanos' advanced wired modem technology, is designed to create a complete solution for a wide range of home gateway products to better serve the carrier segment." Broadcom (NASDAQ:BRCM) and Marvell (NASDAQ:MRVL) are among the other companies competing in this space.
- Qualcomm CEO Steve Mollenkopf suggested last week his company would make new chip acquisitions.
Jul. 30, 2015, 6:33 PM
- On top of missing Q2 estimates, Broadcom (NASDAQ:BRCM) has guided for Q3 revenue of $2.135B (+/- $75M), below a $2.24B consensus. But with many other chipmakers having already issued soft Q3 outlooks, and Broadcom's shares now effectively linked to Avago's, the numbers are being taken in stride.
- Q2 gross margin was 56.6%, +220 bps Q/Q and +170 bps Y/Y, and above a guidance midpoint of 56%. Q3 is expected to drop to 55.3% (+/- 75 bps) in Q3. R&D spend fell 15% Y/Y to $538M thanks to Broadcom's baseband modem exit, while SG&A spend rose 3% to $188M. $128M was spent on buybacks.
- Separately, the WSJ reports the IRS has declined to promise the stock portion of Avago's (NASDAQ:AVGO) pending $37B deal to merge with Broadcom will be a tax-free transaction for Broadcom shareholders. However, if Avago ($35B market cap) remains larger than Broadcom ($31B market cap), the stock portion will be tax-free. Either way, Broadcom shareholders will owe taxes on the deal's $17B cash payout.
- Should the stock portion of the deal be taxable, Avago plans to offer Broadcom investors tax-deferring units instead of stock. That would let investors decide when to make tax payments.
- BRCM +0.6% AH. AVGO -0.9%.
- Broadcom's Q2 results, PR
Jul. 30, 2015, 4:11 PM
- Broadcom (NASDAQ:BRCM): Q2 EPS of $0.72 misses by $0.03.
- Revenue of $2.1B (+2.9% Y/Y) misses by $10M.
Jul. 29, 2015, 5:35 PM
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Jul. 21, 2015, 5:10 PM
- Apple beat FQ3 estimates, but reported slightly below-consensus iPhone unit sales of 47.5M. In addition, FQ4 revenue guidance of $49B-$51B was below a $51.1B consensus. iPhone revenue was up 59% Y/Y, while iPad revenue fell 23%.
- iPhone/iPad chip suppliers are selling off in response. Cirrus Logic (NASDAQ:CRUS) -5.6% AH. Skyworks (NASDAQ:SWKS) -6.8%. Qorvo (NASDAQ:QRVO) -6.4%. Avago (NASDAQ:AVGO) -3.8%. Broadcom (BRCM - merging with Avago) -1.3%. InvenSense (NYSE:INVN) -4%. NXP (NASDAQ:NXPI) -3.4%.
Jul. 17, 2015, 4:16 PM
- Not content with its recent ~$37B cash/stock deal to merge with Broadcom (BRCM +0.2%), acquisition-hungry Avago (AVGO -0.8%) is looking to bid for Broadcom rival Marvell (MRVL +0.5%), "a reputable source" tells Light Reading.
- Marvell moved slightly higher following the report. With a current $6.7B market cap - a deal could require a price above $8B - Marvell would be a relatively easy fish to swallow. However, its product line overlaps with Broadcom's in the Ethernet transceiver, Ethernet switching chip, and Wi-Fi/Bluetooth combo chip markets (among other areas), and the Ethernet overlap could result in antitrust scrutiny.
- There has been speculation Avago isn't done with its buyout binge. The company snapped up LSI, PLX Technology, and Emulex prior to the Broadcom deal, and has a good track record of reaping major cost synergies from acquisitions.
- Meanwhile, Marvell has been viewed as a potential acquisition target as the chip industry continues consolidating. Shares rose earlier this week on a report of buyout interest from state-owned Chinese firm PDSTI.
Jul. 7, 2015, 1:10 PM
- RF chipmakers Skyworks (SWKS -3.8%), Qorvo (QRVO -4.1%), and Avago (AVGO -3.2%) are posting 3%+ declines on what's proving a rough day for many high-beta tech stocks.
- With Chinese equities plunging, Skyworks, Qorvo, and Avago's Chinese exposure could be contributing to their selloff. The Nasdaq is down 0.7%, and the Philadelphia Semi Index 1.7%.
- Avago's decline comes as Oppenheimer's Rick Schafer downgrades merger partner Broadcom (BRCM -2%) to Market Perform. Curiously, he also declares Avago (along with Skyworks) to be a top wireless chip pick.
- Schafer: "Rising RF complexity (and content) remains one of our favorite thematic plays heading into 2H15 ... We see incremental RF content opportunities for both Avago and Skyworks on the forthcoming iPhone 6S ... Skyworks further benefits from 50 percent plus 4G reference design share with China's major baseband suppliers."
- Broadcom shareholders are set to receive either $54.50/share in cash, 0.4378 Avago shares for each Broadcom share, or some combination thereof, with the cash portion of the deal totaling $17B. Broadcom currently trades 7% below the cash payout price, and (based on Avago's current trading levels) 11% below an equity payout price of $56.87.
Jun. 25, 2015, 1:29 PM
- Broadcom (BRCM -0.1%) is partnering with Chinese networking hardware leader H3C (until recently an HP subsidiary) to "explore new market requirements and technical trends to optimize the interaction and performance of current and future platforms and architectures." H3C uses Broadcom's Ethernet ICs in its hardware.
- The company is also partnering with Chinese systems integrator Inspur on 4K/DOCSIS 3.0 set-top solutions relying on Broadcom's chips, and with Beijing-based pay-TV provider StarTimes to "jointly define and develop set-top box offerings in Africa," and "invest engineering resources to develop a series of low-cost set-top boxes and high-end Ultra HD home gateways."
- Broadcom has been taking set-top IC share from STMicroelectronics. On its Q1 CC (transcript), the company stated its set-top/broadband modem chip sales grew at a double-digit Y/Y clip.
- Meanwhile, speculation continues to swirl that Avago (AVGO +0.3%), which is set to merge with Broadcom in a ~$37B cash/stock deal (follows deals for LSI, PLX, and Emulex), is up for further M&A. FBR's Chris Rolland: "They are looking for higher quality, accretive ideas that typically diversify their business. The target list is many."
- With all 4 of Avago's recent deals having a major data center component, Gartner's Sergis Mushell thinks the company could look to fill remaining holes in its data center line, such as power management and timing ICs. IDC believes analog/mixed-signal chipmakers with high gross margins could be in play - Texas Instruments appears to be looking in that direction.
- Prior Broadcom/Avago coverage
May 28, 2015, 1:34 PM
- In a presentation (.pdf) discussing their planned merger, Avago (AVGO -0.4%) and Broadcom (BRCM -2.6%) state they're aiming for a 40% long-term op. margin, up from the 30% collectively possessed by the companies today. Gross margin is forecast to rise to 60% from a current 57%, and R&D and SG&A spend respectively fall to 16% and 4% of revenue from 20% and 7%.
- Avago and Broadcom, who have $15.1B in revenue between them, are only forecasting a 5% long-term revenue CAGR. However, Avago CEO Hock Tan states the outlook is "probably conservative."
- Avago plans to partly finance the $17B cash portion of the deal via $9B worth of new debt. The post-merger company is expected to have $15.5B in debt and $1.3B in cash; Broadcom shareholders will have a 32% stake. The deal is expected to close in Q1 2016.
- Many potential product synergies exist. Among the possibilities: Wi-Fi/Bluetooth solutions that pair Broadcom's combo chips with Avago RF components; server/storage connectivity product lines featuring a mixture of Broadcom's Ethernet transceivers and switching chips and Avago's adapter cards and optical transceivers - Stifel thinks Mellanox (MLNX -0.3%) could be at risk here - and telecom equipment product lines that combine Broadcom's network processors and switching chips with Avago's optical components.
- Meanwhile, in its FQ2 report (issued in tandem with the merger announcement), Avago has guided for FQ3 revenue of $1.74B (+/- $25M), above a $1.68B consensus. The company reported a 66% Y/Y increase in FQ2 wireless chip revenue (aided by strong Apple/Samsung demand), along with 74% and 64% increases in wired infrastructure and industrial/other revenue (lifted by both organic growth and M&A).
May 28, 2015, 7:21 AM
- Avago Technologies (NASDAQ:AVGO) announces it will acquire Broadcom (NASDAQ:BRCM) in a stock and cash transaction valued at $37B.
- Broadcom shareholders will receive $54.50 in cash per share and 0.4378 shares in the newly formed company as part of the deal
- Avago expects the acquisition to be immediately accretive to earnings and help it generate $750M in annual cost synergies within 18 months of the closing.
- BRCM +0.85% premarket to $57.64 after soaring yesterday off leaked reports of the deal.
- Previously: Avago reportedly in merger talks with Broadcom; shares soar (May. 27 2015)
May 27, 2015, 2:26 PM
- The WSJ reports Broadcom (BRCM +16.6%) is "in advanced talks to be bought" by Avago (AVGO +6.4%). Shares of both companies have shot higher.
- A deal would effectively be a merger rather than an acquisition: Avago is currently worth $35.1B, and Broadcom $32B. The post-merger company would have a massive product line spanning a variety of mobile, networking, home electronics, and telecom equipment chip markets.
- Avago has bought a string of companies over the last 18 months amid a massive chip industry consolidation wave, and has been rumored to be eying several others.
- Update (3:37PM ET): Bloomberg is backing up the WSJ's report, while adding a deal could be announced as soon as tomorrow.
- Update 2 (3:50PM): CNBC reports Avago's board plans to vote on the deal tonight.
May 27, 2015, 12:59 PM
- Competitive fears for Broadcom's (BRCM +2.1%) Wi-Fi combo chip ops (largely Qualcomm-related) are overblown, argues BofA/Merrill while reiterating a Buy rating and $54 target.
- Among BofA's arguments: 1) Broadcom's combo chips are still best-in-class, and discrete solutions are preferred on the high-end rather than ones integrated with baseband processors. 2) Broadcom maintains a ~57% combo chip share, and has ~1K dedicated engineers for the business. 3) With combo chips sporting a ~$4 ASP, there's little need for OEMs to get frugal. 4) Broadcom's baseband market exit opens the door to partnerships with former baseband rivals such as Spreadtrum. 5) 802.11ac/dual-band Wi-Fi chips and location hub support (found in Broadcom's Galaxy S6 design) can boost ASPs, and IoT products can increase Broadcom's addressable market.
- The firm also expects Broadcom (aided by its recently-launched Tomahawk switching chip) to benefit from a 25G Ethernet upgrade cycle, and notes the company's set-top chip share gains against STMicroelectronics. It forecasts 2017 EPS of $4 (the 2015 consensus is only at $3.01), and thinks a $61-$75/share valuation is possible on a sum-of-the-parts basis.
May 12, 2015, 12:46 PM
- Broadcom (NASDAQ:BRCM) declares $0.14/share quarterly dividend, in line with previous.
- Forward yield 1.22%
- Payable June 15; for shareholders of record May 29; ex-div May 27.
Broadcom Corp is provider of semiconductors for wired and wireless communications. It provides a portfolio of SoCs that seamlessly deliver voice, video, data and multimedia connectivity in the home, office and mobile environments.
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