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Broadcom profit beats; expects wireless to remain weak

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Broadcom Inc's quarterly profit beat Wall Street estimates as demand for its networking chips and storage solutions from data centers more than made up for weakness in its wireless business.

[BENGALURU] Broadcom Inc's quarterly profit beat Wall Street estimates as demand for its networking chips and storage solutions from data centers more than made up for weakness in its wireless business.

The company said it expects wireless revenue to be flat or slightly down in the third quarter, from the second quarter, as growth in demand from a large North American smartphone customer will be offset by a decline in shipments to a Korean customer.

Most analysts believe that the North American customer is Apple Inc, which accounted for a fifth of Broadcom's revenue last year, and the Korean customer is Samsung Electronics Co Ltd.

However, Broadcom expects demand to remain healthy from cloud data centers and enterprise IT, chief executive officer Hock Tan said on a call with analyst.

Broadcom, which was a US company until it was bought in 2016 by Singapore's Avago, redomiciled in April, weeks after US President Donald Trump blocked its US$117 billion offer to buy Qualcomm Inc on national security grounds.

Analysts see Broadcom's moving headquarters as an attempt to buy US companies without coming under the scrutiny of the Committee on Foreign Investment in the United States.

The chipmaker's shares were down marginally in extended trading.

"I think the stock will trade in line to slightly underperform the semiconductor peer group unless they make a big acquisition or a few medium-size acquisitions," said Summit Insights Group analyst Kinngai Chan.

The company's net income attributable to common stock jumped nine-fold to US$3.72 billion, or US$8.33 per share, in the second quarter ended May 6.

Revenue from the company's wired infrastructure business, which sells data center switching chips to customers such as Amazon.com Inc and switching ICs to the likes of Cisco Systems Inc, jumped 46 per cent to US$2.30 billion.

Revenue from its wireless communications business, which offers RF filters and Wifi chips to smartphone makers, rose 26 per cent to US$1.30 billion versus a 41 per cent rise in the first quarter. Broadcom had warned of a decline in this segment in April.

Excluding items, the company earned US$4.88 per share, while analysts on average had expected US$4.76, according to Thomson Reuters I/B/E/S.

Net revenue jumped 19.7 per cent to US$5.01 billion, above the average analyst estimate of US$5.00 billion.

The San Jose, California-based company reiterated its current-quarter revenue forecast of US$5.05 billion, plus or minus US$75 million, in line with analysts' estimates.

REUTERS

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