Broadcom Earnings Call Insights: Mobile Guidance and Seasonality for Wireless

Broadcom Corporation (NASDAQ:BRCM) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Mobile Guidance

James Schneider – Goldman Sachs: I was wondering in terms of the Mobile & Wireless guidance, how should we think about your guidance for that segment relative to what you expect the overall market to do. In other words, do you think you’re doing better or worse than the market in terms of gain you are losing share in Q1?

Scott A. McGregor – President and CEO: Jim, I would say in the connectivity space there is – it’s a soft quarter from a seasonality point of view. So, that amounts to most of the decline. In 3G basebands, we actually expect to grow though. So, I expect we are taking share in basebands and probably holding share in connectivity or maybe gaining a little bit.

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James Schneider – Goldman Sachs: Then as a follow-up. Eric, maybe if you look at mix effect on gross margin as we head through the year, what do you expect the 40-nanometer mix to do in terms of improving gross margin is that going to be a tailwind to margins and what do you expect that 40-nanometer mix to be by the end of this year?

Eric K. Brandt – EVP and CFO: We ended Q4 at just over 20%, 40-nanometer we benefited from that. I think 40-nanometer will benefit us over the course of the year. I think the real challenge will be, what is the strength of the Infrastructure business, which obviously gives us a fairly rich mix, so I think the 40-nanometer is a positive, and assuming the infrastructure market rebounds in the middle and back half of the year that will be a positive as well. To the extent that it doesn’t and we continue to grow on the Mobile & Wireless space we could have a little bit of headwind offsetting that 40-nanometer tailwind.

Seasonality for Wireless

Harlan Sur – JPMorgan: So, if I recall, I think seasonality for wireless is typically down about 5% sequentially in Q1. Is this segment going to be in line or down more than the seasonal trend this quarter?

Eric K. Brandt – EVP and CFO: So, Harlan, it’s Eric. I think that everything will be down roughly about the same as the midpoint of our guidance. Mobile & Wireless might be a touch lower than that.

Harlan Sur – JPMorgan: Then, in Q4, obviously, Networking was weak due to softness in virtually all of your sub-segments; data center, enterprise, service provider. Are all three sub-segments again contributing to the decline this quarter, and what are you hearing from your service provider customers as it relates to the positive CapEx spending trends that we are hearing about? When does that start to show up you think in your backlog and shipments?

Scott A. McGregor – President and CEO: So, the first part of your question, yes, I think it is across all the segments, approximately equally. There is no one that really jumps out. In terms of positive CapEx trends, I want to be honest, I haven’t heard that many positive CapEx trends. We’ve seen sort of a mix market out there with some of the U.S. carriers even revising downward in the last month. So, we’ll have to wait to see the CapEx come back. Europe is still very soft. I think the one potential bright spot is we’re hearing anecdotally that there’s some new tenders that are coming out in China and that might be the first thing we see in terms of driving some new waves of CapEx there, but it’s been soft for a while.

Eric K. Brandt – EVP and CFO: And I’d just add to it; just a point, I think it’s important to look year-over-year at this, Harlan. If you look year-over-year, the midpoint of our guidance is up 4% year-on-year. If you look at the companies that have reported to-date and there’s still some large ones obviously to report, in the semiconductor space year-on-year, the reporting number, that’s down about 2.5%. That’s about 6.5 point swing. Interestingly, it’s very similar to the full year results that we saw on a weighted-average mix basis for our peer set. Our peer set was down on a weighted average basis about 30 basis points and the Company when you adjust for the acquisition was up about 5 basis points. So, you’re talking about 520 to 530 basis points. So, look, year-over-year as we go into Q1 to have a similar effect in terms of the relative share gain between the companies, plus or minus, what other companies report after us.

A Closer Look: Broadcom Corporation Earnings Cheat Sheet>>