Broadcom Profit Beats Expectations on Rising Demand From Smartphone Makers

Wireless chip maker Broadcom reported higher-than-expected quarterly revenue and profit, helped by strong sales of its Wi-Fi and broadband chips to smartphone makers such as Apple and Samsung Electronics.

Shares of Broadcom, which also forecast current-quarter revenue above analysts' expectations, rose 5.4 percent in extended trading on Tuesday.

The company has been benefiting from strong demand for Apple's iPhone 6, which was launched in September. Samsung's Galaxy S6, launched in April, is also expected to drive sales this year.

Broadcom is exiting its baseband chips business after falling behind Qualcomm in the development of 4G technology increasingly used by carriers.

While the move freed up resources, it also raised concerns of competitive disadvantage due to the lack of a 4G product.

The stronger-than-expected forecast allayed some of those concerns as the baseband exit is expected to help the company focus more on its better-performing networking and broadband businesses.

Sanford C. Bernstein analyst Stacy Rasgon said Broadcom's strong second-quarter forecast could be coming on the back of higher demand for chips from Samsung for its Galaxy S6 smartphone.

Samsung said last week that demand for both the flat-screen and curved-screen models of Galaxy S6 was "much higher" than expected. Apple sold 74.5 million iPhones in the quarter ended December 27.

Broadcom forecast revenue of $2.10 billion, plus or minus $75 million, for the second quarter ending June 30. Analysts on average were expecting $2.07 billion, according to Thomson Reuters I/B/E/S.

Broadcom also said it took a restructuring charge of $159 million, as of March 31, related to its exit from the baseband business.

The contribution of the baseband business to Broadcom's total revenue fell to 4 percent in 2014 from 8 percent in 2013.

Broadcom's net income rose to $209 million, or 34 cents per share, in the first quarter ended March 31 from $165 million, or 28 cents per share, a year earlier.

Excluding items, the company earned 64 cents per share.

Revenue rose about 4 percent to $2.06 billion.

Analysts on average had expected earnings of 60 cents per share and revenue of $2.01 billion.

The Irvine, California-based company's shares closed at $43.98 on Tuesday on the Nasdaq.

© Thomson Reuters 2015