With that said, I sold what was left of my Broadcom (BRCM) position yesterday (nice timing eh?). Some color on the earnings report:
- Chip maker Broadcom Corp (BRCM) posted a 75 percent drop in quarterly profit on Tuesday, missing market forecasts as R&D and litigation costs offset higher revenue, sending its shares down 4.5 percent.
- The maker of chips for everything from digital music players and television set-top boxes to cell phones said third-quarter net profit fell to $27.8 million, or 5 cents per share, from $110.2 million, or 19 cents a share, a year ago.
- The latest earnings per share figure was 2 cents short of analysts' average estimates, even though a 5.2 percent rise in revenue to $950 million had beat Wall Street's forecast of $928.47 million, according to Reuters Estimates.
- "Given the revenue upside they should have been able to post an EPS upside," American Technology Research analyst Shaw Wu said. "They look like they're investing more than people thought they would."
- Broadcom said its research and development costs increased to $94.6 million in the quarter from $78.2 million a year ago.
- The company is engaged in multiple legal disputes with bigger rival Qualcomm, which is appealing a U.S. government ban on sales of some phones with Qualcomm chips found to infringe a Broadcom patent.
Takeaway: In between its constant legal fights with Qualcomm (QCOM), Broadcom is trying to be the Intel (INTC) of communication chips. I would not consider this name typical of the fund's holdings and objectives as its not one of the top 50 growth stories out there - but I like the areas of business it is in, and the technicals looked good so it gave the fund a nice return, although I never made it a huge position. With the stock down to $37 in after hours, Broadcom has now dropped to its 50 day moving average so might present an attractive opportunity; although with my small cash position I have to weigh if now is the time. More upside might be found in other places near term. Or holding cash might be a better option.
But in the big picture I really hate what I read above - this is Wall Street's fascination with 13 week quarters. In private industry you'd be lauded for investment in research & development to help stay ahead of competitors; in public industry you get spanked because you spent "too much" and did not match the analysts models. So for the benefit of a 3 month period you have to forego investing in the future 1,2,3 years. Its a very backwards way we look at companies, so focused on short time frames.
No position
4 comments:
curious if 5 days of heavy selling down to test $32, almost as low as late June low point of $30-, is worth some dip buying efforts. if in fact the company is on course but has a little bump in the road. possible bounce catalyst... in november 2007 the first quarterly royality payment is either audited or tendered from Verizon for Qualcomm phones.
A nice check might fund some of the R&D spending. is this too optomistic?
There is a lot of support down there in the 29-30 range from May - July. Wow, the stock really came a long way in a short time, reminds me of BRCM of late 90s. I'd look for downside to there and than it will probably be worth a go. Myself, I am a bit cautious in opening new long positions at this moment so I am going to give it some time and see how things play out. I do believe that the selloff reasons were a bit ridiculous, but you don't want to be standing in front of a tidal wave of institutional sellers. Volume was still quite heavy today on the downside. Until volume decreases, you can't say it is washed out yet.
thankyou. i see it like this.. BRCM had a fairly good low point in June with the 29s. the bounce was $14 towards $43 and the retracement has been $11 towards $32 so far. i wonder if this is a technolgy growth franchise that justifies rapid dip buying or is it more generic technology company and should be ignored for now.
I think of them as a poor man's Intel - they are in a lot of nicely growing communication sectors and should growth with those markets but not a duopoly like Intel enjoys. If you are patient and get a $29 print on BRCM and have a longer timeline I think it will serve you well.
Post a Comment