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Stock Analyst Update

Broadcom Juggernaut Delivers the Goods Again

Communication chipmaker continues to distance itself from its competitors.


What Happened
Broadcom (BRCM) reported pro-forma earnings of $0.32 per share Tuesday evening, a number that exceeded First Call’s consensus estimate by one penny. Top-line growth was strong yet again, as sales increased by 18% over the prior quarter, bringing the firm’s annual revenue run rate to more than $1 billion. Due to its aggressive acquisition strategy, roughly three quarters of the firm’s asset value is now in goodwill and other intangibles. Management anticipates another strong performance in the March quarter, with sequential sales growth of more than 20%.

What It Means for Investors
We are impressed with Broadcom’s current quarterly results and its own near-term outlook, but after the stock’s sharp recovery so far in 2001 (more than 50% year to date), we are hard-pressed to pound the table on the shares at its current price. We are not only impressed with Broadcom’s impressive technology portfolio, but also with the firm's uncanny business sense in the markets it serves. Broadcom continued to grow its overall business at a blistering pace despite significant weakness across most of the chip sector. A large part of this quarter’s success is owed to a strong ramp of sales at 3Com (COMS), for which the firm has become a primary supplier of leading edge networking products. This offset weakness from Cisco (CSCO), another one of its major customers.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.