Broadcom's Q2 profit beats Wall St estimates

Broadcom said it expects wireless revenue to be flat or slightly down in the third quarter, from the second quarter, as growth in demand from a large North American smartphone customer will be offset by a decline in shipments to a Korean customer. Bu
Broadcom said it expects wireless revenue to be flat or slightly down in the third quarter, from the second quarter, as growth in demand from a large North American smartphone customer will be offset by a decline in shipments to a Korean customer. But chief executive officer Hock Tan said it expects demand to remain healthy from cloud data centres and enterprise IT.PHOTO: AGENCE FRANCE-PRESSE

Chipmaker's wired infrastructure business makes up for weakness in wireless segment

BENGALARU • Broadcom's quarterly profit beat Wall Street estimates as demand for its networking chips and storage solutions from data centres more than made up for weakness in its wireless business.

The company said it expects wireless revenue to be flat or slightly down in the third quarter, from the second quarter, as growth in demand from a large North American smartphone customer will be offset by a decline in shipments to a Korean customer.

Most analysts believe the North American customer is Apple, which accounted for a fifth of Broadcom's revenue last year, and the Korean customer is Samsung Electronics.

However, Broadcom expects demand to remain healthy from cloud data centres and enterprise IT, chief executive officer Hock Tan said on a call with analysts.

Broadcom, which was a US company until it was bought in 2016 by Singapore's Avago, redomiciled in April, weeks after US President Donald Trump blocked its US$117 billion (S$156 billion) offer to buy Qualcomm on national security grounds.

Analysts see Broadcom's moving headquarters as an attempt to buy US companies without coming under the scrutiny of the Committee on Foreign Investment in the US.

The chipmaker's shares were down marginally in extended trading. "I think the stock will trade in line to slightly underperform the semiconductor peer group unless they make a big acquisition or a few medium-sized acquisitions," Summit Insights Group analyst Kinngai Chan said.

The company's net income attributable to common stock jumped ninefold to US$3.72 billion, or US$8.33 per share, in the second quarter ended May 6.

Revenue from the firm's wired infrastructure business, which sells data centre switching chips to customers such as Amazon.com and switching ICs to the likes of Cisco Systems, jumped 46 per cent to US$2.3 billion.

Revenue from its wireless communications business, which offers RF filters and Wi-Fi chips to smartphone makers, rose 26 per cent to US$1.3 billion versus a 41 per cent rise in the first quarter. Broadcom had warned of a decline in this segment in April.

Net revenue jumped 19.7 per cent to US$5.01 billion, above the average analyst estimate of US$5 billion.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 09, 2018, with the headline 'Broadcom's Q2 profit beats Wall St estimates'. Print Edition | Subscribe