Broadcom data centre chip business bolsters smartphone revenues
Fri 8 Jun 2018
In its latest earnings release, Broadcom Inc. showed strong sales in data centre chips, offsetting a sharp drop in demand for parts from a ‘large North American smartphone customer.’
Broadcom reported revenues of approximately $5.05 billion (approx £3.77 billion) for the quarter ending in July, with a margin of error of plus or minus $75 million dollars. This estimate is in line with the $5.06 billion projected by financial analysts.
In a conference call, Broadcom CEO Hock Tan said that wireless revenue will either stabilize or possibly decline, but that wired infrastructure sales will continue to grow. “Our overall business remains robust and stable,” he said.
Tan also said that while overall revenue was affected by a sharp drop in demand from a ‘North American smartphone customer’ – possibly Apple – the company expects that demand from this customer will bounce back with the introduction of new products later in the year. Any future growth in that area, however, will be offset by an expected decline in demand from other global customers.
The earnings information released this week is in line with a stockholder update that was given on April 30, to reassure investors that the company had diversified enough to withstand the decline in demand for smartphone components.
In the earnings call, CEO Tan noted that enterprise storage represented 23% of total revenue, which included over $400 million from the Brocade Fiber Channel acquisition. In total, enterprise storage grew 17% over the previous quarter and 63% year-over-year.
After a merger with Qualcomm was blocked in March, Broadcom has been relatively quiet on the mergers and acquisitions front, focusing instead on a stock repurchase plan. In the first six weeks of the stock repurchase program, Broadcom has repurchased 6.4 million shares, returning $1.5 billion to investors. Tan noted that $10.5 billion remains in the authorized stock repurchase fund, and said that the company plans to “continue to aggressively repurchase our shares as long as we believe that we can generate superior returns in doing so.”
Broadcom stock rose slightly in the wake of the optimistic news, from $263.20 per share to $264.68 at the time the market closed, with an additional 1% increase after market hours.