Broadcom Corporation (BRCM) generated revenues of $1.96 billion in the third quarter of 2011, up 8.4% year over year.
In terms of end-markets, the Broadband Communications revenue increased 2% sequentially, driven by solid sales from core set-top boxes partially offset by a decline in broadband modem business. The current generation of set-top box solutions is benefiting from a transition to digital broadcasting, growth in emerging markets where pay-TV subscribers could reach 0.5 billion by 2016 and increased global adoption of HD broadcasting.
The Infrastructure & Networking business was up 4% sequentially driven by a rebound in controller solutions, microwave sales and growth in switching products. Enterprise revenue was better than management expectations. Data Center sales increased sequentially, but service provider solutions were soft.
The Mobile and Wireless business grew 16% sequentially driven by a significant expansion in sales across wireless connectivity and cellular baseband solutions. Within the cellular baseband market, Broadcom is pleased with the significant growth in 3G shipments to Samsung and multiple other handset OEMs.
On a product basis, product revenue grew 8.7% year over year to $1.9 billion. Income from the Qualcomm agreement was flat at 51.7 million. License revenues declined 40% year over year to $3.0 million.
Margins: Product gross margin was flat at 50.9% but declined from 51.1% in the previous quarter.
Broadcom’s net income came in at $270 million or $0.48 per diluted share compared to a net income of $175 million or $0.31 per diluted share in the previous quarter and a net income of $328 million or $0.60 per diluted share in the year-ago quarter. The net income per share came reported in the quarter missed the Zacks Consensus Estimate of $0.40.
Balance sheet: During the quarter, Broadcom generated $534 million of cash from operations and used $44.0 million for capital expenditures. Accounts receivable days sales outstanding were 38 days in the quarter compared to 35 days in the previous quarter.
Broadcom returned $48 million in capital to shareholders in the quarter in the form of dividends. Broadcom ended the quarter with cash and equivalents of $2.3 billion, up from $1.8 billion at the end of second quarter.
Guidance: For the fourth quarter of 2011, Broadcom projects revenues around $1.7 billion – $1.8 billion. Management expects revenues from all segments to be down sequentially across all segments driven by softness in general demand. The company expects revenues from Mobile & Wireless business to decline sequentially.
Revenue from Broadband Communications segment is expected to be down primarily due to the decline in shipments of discontinued DTV and Blu-ray products. Revenue from Infrastructure solutions to projected to decline sequentially due to softness in demand. Product gross margin is expected to be flat to down slightly on a sequential basis.
The weaker-than-expected results and guidance disappointed investors. Shares of Broadcom declined 4.25% in after-hours trading to close at $35.80.
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