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Broadcom refuses to provide full-year outlook, cites limited visibility as it ‘scrubs’ backlog

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Broadcom Inc. late Thursday gave Wall Street analysts quarterly earnings and an outlook that topped consensus estimates, hiked its dividend and recommitted to share buybacks, yet analysts kept asking for more of a forecast from the chip and software company.

Late Thursday, Broadcom
AVGO,
+2.43%
forecast revenue of about $8.9 billion for the January-ending quarter, a 15% increase from a year ago, while analysts surveyed by FactSet estimate $8.78 billion.

“Our year forecast will grow,” Hock Tan, Broadcom’s chief executive, told analysts on the call. “We’re really booked.” But that was about it. Analysts focused on the backlog of products Broadcom is grinding its way through.

Given a two-year, pandemic-triggered global chip shortage that quickly flipped to signs of a glut, Tan reiterated his sales policy to analysts, saying Broadcom does not cancel orders and monitors its customers for signs of hoarding.

“We haven’t changed our focus on ensuring that we do not ship products to the wrong people who just put it on the shelves,” Tan said. Broadcom would also not comment on how fast it is going through its backlog. On the call, Bernstein analyst Stacy Rasgon asked if the backlog had changed since last quarter’s $31 billion and lead times of 50 weeks. Tan refused to comment.

On providing a yearly forecast, Tan refused to give in, repeating that the year would “grow.”

“Other than that, I’m not telling you what it is,” he said. Like last quarter, Tan defended his positive, but vague, outlook and said that end-market demand was solid.

Shares of Broadcom
AVGO,
+2.43%
rose steadily to as much as 4% after hours, following a 2.4% rise in the regular session to close at $531.08.

Broadcom reported fiscal fourth-quarter net income of $3.31 billion, or $7.83 a share, compared with $1.91 billion, or $4.45 a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation and other items, were $10.45 a share, compared with $7.81 a share in the year-ago quarter.

Revenue rose to $8.93 billion from $7.41 billion in the year-ago quarter, as chip sales rose 26% to $7.09 billion from the year-ago period, and infrastructure software sales increased by 4% to $1.84 billion.

Analysts had expected earnings of $10.28 a share on revenue of $8.9 billion. The Street also forecast chip sales, on average, of $7.04 billion and infrastructure software sales of $1.86 billion.

What Broadcom did want to talk about was that it hiked its quarterly dividend by 12%, to $4.60 a share, and that it will resume share buybacks with $13 billion in repurchase authority available. Last year, Broadcom promised that it would follow through on $10 billion in buybacks by the end of 2022.

The company also said it expects to close its $61 billion purchase of VMware sometime in fiscal 2023. VMware is a big addition to Broadcom’s software holdings, which also include Symantec’s enterprise security business and CA Inc. 

Year to date, shares of Broadcom have declined 20%. In comparison, the S&P 500 index 
SPX,
+0.75%
has fallen 17%, the tech-heavy Nasdaq Composite index 
COMP,
+1.13%
is down 29%, and the PHLX Semiconductor Index
SOX,
+2.67%
  has dropped 31%.

Credit: marketwatch.com

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