Tue, Oct. 6, 12:57 PM
- Skyworks (NASDAQ:SWKS) has tumbled towards $75 after announcing it's buying storage and telecom IC vendor PMC-Sierra (NASDAQ:PMCS) for $2B in cash on hand. (PR)
- Fellow RF chipmaker Avago (AVGO -6.7%), which (thanks to the LSI acquisition) competes against PMC-Sierra in the storage controller market, is also off, as is merger partner Broadcom (BRCM -3.2%), which competes against PMC to an extent in the telecom IC and network processor markets. RF peer Qorvo (QRVO -3.3%) is also getting hit. The Nasdaq is down 1.2%.
- Possibly hurting the group: Skyworks has used the PMC deal to announce it expects FQ4 (calendar Q3) revenue of $880M and EPS of $1.52. That's slightly above prior guidance of $875M and $1.51 and a consensus of $876M and $1.51, but expectations have been high following a long string of beat-and-raise quarters.
- The PMC acquisition expands Skyworks' reach to a slew of non-RF chip markets and enterprise/telecom infrastructure end-markets. It's expected to yield $75M in cost synergies within 12 months of closing (expected in 1H16), and subsequently boost Skyworks' annual EPS by $0.75. Assuming that target is hit, Skyworks is paying 14x forward EPS.
- Update (1:04PM ET): BofA/Merrill is defending Skyworks and Avago, arguing forward P/Es of less than 10 make shares very cheap.
- Update 2 (5:01PM ET): The group staged a comeback in afternoon trading. Skyworks closed down 1.4%, Avago 3.4%, Qorvo 1.1%, and Broadcom 1.6%. The Nasdaq closed down 0.7%.
Tue, Sep. 29, 6:52 PM
- Bloomberg reports Aquantia, a top provider of transceivers (PHYs) for running 10G Ethernet over copper wire (10GBASE-T), is planning to go public.
- Aquantia was founded in 2004 and has raised over $200M since. Its chips are used within enterprise and cloud data centers - the latter market has seen rapid growth - enterprise campus networks, and mobile infrastructure networks.
- Broadcom (NASDAQ:BRCM) is a major rival; Aquantia claimed last year it had 70% of the 10GBASE-T transceiver market. Adoption of more powerful 25G and 40G links (typically run over optical cables) has been picking up in cloud data centers, with 100G adoption expected to pick up going forward.
- With high R&D costs and tough competition from bigger rivals restricting VC funding, chip IPO activity remains at a small fraction of Dot.com bubble levels. Meanwhile, publicly-traded chipmakers continue merging at a brisk pace.
Mon, Sep. 28, 7:03 PM
- iFixit's teardown of the 4.7" iPhone 6S turned up two Skyworks (NASDAQ:SWKS) power amplifier modules, much like last year's teardown of the iPhone 6+. However, its teardown of the 5.5" iPhone 6S+ also uncovered a cellular/GPS receive low noise amplifier (LNA) and filter module.
- B. Riley's Craig Ellis thinks the teardowns point to dollar content improvements relative to the 6/6+. "[T]he 'power amplifier module’s (green) baseband-like size (orange) and larger footprint versus similar functional parts from AVGO (blue) /QRVO (yellow) suggest it packs multiple PA’s, filters and switches – we believe it alone is multiple dollars in content ... We believe the [receive module] win is for just the Plus so it’s a modest negative; it’s one of two devices but it’s an integrated component we believe worth over a dollar in content. Lastly, we believe SWKS retains [Wi-Fi power amplifier] parts in both devices channel count goes from one to two, doubling content."
- Meanwhile, Chipworks' 6S teardown turned up two Avago (NASDAQ:AVGO) power amplifier modules, even with the iPhone 6. Craig-Hallum thinks the company is getting $6.75 per 6S unit, up from $6.50 with the iPhone 6. Avago merger partner Broadcom (NASDAQ:BRCM) is still believed to be supplying a Wi-Fi/Bluetooth combo chip (housed inside a Wi-Fi module).
- Chipworks also found four Texas Instruments (NASDAQ:TXN) chips - a charger IC, a power management IC, a display driver, and an unidentified part labeled 6BB27. Last year's iFixit teardowns uncovered a TI touch transmitter IC.
Tue, Sep. 15, 7:23 PM
- Looking to better cater to growing use of 25G and 100G Ethernet links within data centers (particularly among cloud service providers and others with high-end performance needs), Arista (NYSE:ANET) has rolled out the 7060CX-32S, a top-of-rack (i.e. "leaf") switch that can deliver 10, 25, 40, 50, and 100G links on 32 ports while consuming a modest 1RU of rack space.
- Other new Arista switches include the 7260CX-64, which provides 64 100G links in a 2RU chassis, and the 7320CX-32C, modular switches supporting 32 100G ports that can be combined to form 256-port systems. 25G links are increasingly being used to connect servers with top-of-rack switches, while 40G and 100G links are being adopted to aggregate traffic to and from servers.
- The hardware relies on Broadcom's (NASDAQ:BRCM) StrataXGS Tomahawk switching chip, which delivers up to 3.2Tbps of switching capacity. Cisco and Dell have also announced Tomahawk-based switches. Mellanox is looking to challenge Broadcom with its 6.4Tbps Spectrum switching chips (used in 10-100G-capable Mellanox switches), while Cavium is going after the market with its 3.2Tbps Xpliant chips.
- Also: Arista has added new high-availability features for its EOS OS (powers the company's switches). The features enable software upgrades and port speed changes to occur without any effect on uptime or service quality.
- Arista remains down 19% from last Tuesday's close, thanks to reports the ITC staff has concluded the company infringes 3 Cisco patents. RBC and SunTrust have defended Arista, with the former arguing Arista might be able to come up with a workaround for Cisco's IP.
Fri, Sep. 11, 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.
Wed, Aug. 26, 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
Thu, Aug. 13, 12:53 PM
Thu, Aug. 6, 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.
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
Thu, Jul. 30, 4:11 PM
Wed, Jul. 29, 5:35 PM
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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.
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, 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).
BRCM vs. ETF Alternatives
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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