Yesterday, 2:33 PM
- Apple is down 2.6% on strong volume (adding to recent post-earnings declines), and a slew of iPhone/iPad chip suppliers are also seeing major losses today. The Nasdaq is down just 0.3%, while the Philadelphia Semi Index is down 1.5%.
- RF chipmakers Skyworks (SWKS -5.4%), Qorvo (QRVO -3.8%), and Avago (AVGO -3%) are among the decliners, as are audio codec supplier Cirrus Logic (CRUS -5.5%), motion sensor supplier InvenSense (INVN -5.7%), NFC/motion co-processor supplier NXP (NXPI -3.3%), and LCD driver supplier Synaptics (SYNA -3.8%). The selloff has occurred in the absence of major news
- NXP merger partner Freescale (FSL -2.8%) is also off, as is chip packaging/testing firm Amkor (AMKR -4.2%), which has strong iPhone exposure. Earlier today, the EC announced NXP has offered concessions to win regulatory approval for the Freescale deal, which has a review deadline of Sep. 4. NXP has already agreed to sell its base station power amplifier unit for $1.8B to appease regulators.
- InvenSense reports after the close. The other aforementioned names have already posted their calendar Q2 results.
Thu, Jul. 30, 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
Wed, Jul. 29, 4:33 PM
- Skyworks (NASDAQ:SWKS) and Avago (NASDAQ:AVGO) have sold off in AH trading after rival Qorvo (down 15.2%) provided soft FQ2 (calendar Q3) guidance to go with an FQ1 beat.
- Qorvo didn't give an explanation (Apple/Samsung share loss? Soft Chinese demand?) in its earnings release for the outlook. The numbers come 6 days after Skyworks provided above-consensus FQ4 guidance to go with an FQ3 beat. Avago is expected to report in August.
- Update: On its earnings call, Qorvo stated demand from Chinese phone OEMs has softened, and that some are carrying excess inventory. The company also joined other chipmakers in mentioning Chinese 4G base station demand is weak. Skyworks closed down 2.7% AH, and Avago down 3.3%.
Thu, Jul. 23, 1:40 PM
- Micron (MU +3.7%), Skyworks (SWKS +3.2%), Qorvo (QRVO +1.2%), and Avago (AVGO +1.9%) are recovering some of the Wednesday losses seen in response to Apple's FQ3 iPhone sales print and FQ4 guidance. The Nasdaq is down 0.4%.
- The gains come after Apple-dependent Cirrus Logic (CRUS +19.8%) beat FQ1 estimates and provided strong FQ2 guidance, and beaten-down NAND flash giant SanDisk (SNDK +17.5%) delivered a Q2 beat and offered (better than feared) in-line guidance. Micron received 35% of its May quarter revenue from NAND.
- The numbers are overshadowing Qualcomm's soft FQ4 guidance, blamed to a large extent on iPhone share gains and the lack of a Galaxy S6 app processor design win.
- Stifel's Tore Svanberg has upgraded Cirrus to Buy, while asserting the audio codec developer is "entering a significant product cycle over the next 12-24 months." He's upbeat about the launch of 55nm codecs (expected to provide cost savings), and sees evidence of further traction with top Android OEMs.
- Oppenheimer (Perform rating) estimates Cirrus will (thanks to a smart codec design win) get over $3+ per iPhone 6S unit compared with ~$2.15 per iPhone 6, and notes another smart codec win with a top-tier OEM will ramp over the next 2 quarters. Apple was 62% of FQ1 revenue vs. 65% in FQ4; Samsung (lifted by a Galaxy S6 win) was 18%.
- BofA/Merrill has upgraded SanDisk to Buy. Pac Crest's Monica Garg (Outperform) notes Q2 retail and enterprise sales were both better than expected, as was an ASP decline of 6%. She's also pleased a client SSD delayed by qualification issues will begin shipping in Q4, and asserts SanDisk has both the best planar NAND technology and the industry's first 48-layer 3D NAND chips. Bernstein is also upbeat.
- Skyworks reports after the bell. Various analysts have defended Skyworks, Avago, and Qorvo following Apple's numbers, asserting 4G growth/greater RF complexity remains a tailwind. Oppenheimer estimates Skyworks will see a "15%-20% content boost" with the iPhone 6S, and Avago a more modest gain.
- Prior Cirrus coverage. Prior SanDisk coverage.
Tue, Jul. 21, 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%.
Fri, Jul. 17, 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.
Thu, Jul. 9, 1:02 PM
- Avago (AVGO -1.3%) has joined Mellanox and Brocade in selling off in response to a major calendar Q2 warning from Fibre Channel and Ethernet adapter card/controller/switch maker QLogic (down 20.9%).
- QLogic, which also posted a calendar Q1 sales miss and provided light guidance in late April, blames its warning on "lower than expected demand due to general weakness in the Company's traditional enterprise server and storage markets, and a build-up of inventory at certain of its OEM customers due to a slower next-generation server transition in enterprise environments." The latter is an apparent reference to Intel's Grantley Xeon server CPU platform.
- Avago recently acquired QLogic archrival Emulex, and before that bought PCIe switch maker PLX Technology. Merger partner Broadcom also has strong server connectivity exposure, via its Ethernet transceiver and switching chips. Stifel has speculated Avago could work on end-to-end Ethernet solutions combining the company's optical transceivers, Emulex's adapter cards, and Broadcom's switching chips.
Tue, Jul. 7, 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.
Thu, Jun. 25, 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
Thu, Jun. 4, 9:16 AM
Thu, May 28, 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).
Thu, May 28, 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)
Thu, May 28, 7:03 AM
Wed, May 27, 5:35 PM
Wed, May 27, 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.
Fri, May 22, 12:51 PM
- As part of a broader chip stock coverage launch, Mizuho's Vijay Rakesh has assigned Buy ratings to Micron (MU +2.2%), Avago (AVGO +1.8%), and Synaptics (SYNA +2.6%). His targets are respectively $39, $150, and $115.
- Like other bulls, Rakesh sees Micron's PC DRAM sales (recently under pressure) improving in 2H15, aided by the launch of Windows 10 and Intel's 14nm Skylake CPU platform. He also downplays concerns about Micron's 20nm DRAM transition, thinks tri-level cell (TLC) and 3D NAND ramps will drive NAND gross margin improvement, and likes the hiring of Ernie Maddock as CFO.
- Rakesh forecasts Avago will continue benefiting from strong FBAR filter sales (boosted by 4G phone growth), growing smartphone dollar content, and the Chinese 4G ramp (aided by recent carrier tariff cuts). "AVGO is completely booked on its FBAR filter capacity through 2015 and the ramp of its industry leading 8-inch FBAR wafer capacity will likely lead to significant operational efficiencies versus its peers"
- He also notes Cisco is seeing strong sales for its ASR 9000 edge router line, which Avago has exposure to, and expects the Emulex deal to boost margins and EPS.
- TDDI (integrated touch/display driver) ICs, fingerprint sensor sales, and Chinese 4G demand are expected to act as tailwinds for Synaptics. Rakesh forecasts the company will produce FY16 (ends June '16) free cash flow of $304M, and thinks this could pave the way for buybacks.
- Synaptics has made fresh highs, and Avago is within $5 of a high of $136.28. Micron remains 25% below a high of $36.59.
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