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Transcript of Techinsidr.com - Broadcom Equity Research
8/7/2019 Techinsidr.com - Broadcom Equity Research
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Analyst Report | April 19, 2011 | Symbol: BRCM
Broadcom Corporation Techinsidr.com
This report is for i nformation purposes only and should not be considered a solicitation to buy or sell any security. Neither Techinsidr.com nor any other party guarantees its accuracy or makes warrantiesregarding results from its usage. Redistribution is prohibited without the express written consent of Techinsidr.com All rights reserved.
Techinsidr Recommendation: Buy Current Price:
$38.19 (As of Apr 19, 2011)
12-Mo Price Target:
$46.00
Investment Style:
Large-Cap Tech
Sector:
Technology
Industry:
Semiconductor Devices
Summary: Broadcom Corporation is a provider of semiconductor for wired and wireless
communications. Broadcom products enable the delivery of voice, video, data and multimed
to and throughout the home, the office and the mobile environment. The company provide
range of system-on-a-chip (SoC), and software solutions to manufacturers of computing and
networking equipment, digital entertainment and broadband access products, and mobile
devices.
Key Statistics (Source: WSJ, Yahoo Finance)
52-Wk Range: $47.39 – 29.05 Market Capitalization(B) $20.59 Outstanding Shares(M) 53
10K Invested 5 Yrs Ago: $8758 Current P/E Ratio 19.24 Institutional Ownership 88.
12-Month Trailing EPS 1.99 Forward P/E (FYE Dec 31,2012) 12.53 Insider Ownership 0.2
Annual EPS Estimate 2.77 Beta 1.26 Dividend & Yield 0.36 (0.90
Stock Performance Key Metrics
x
Stock Performance
Price Change
3 Mo.
-17.6%
1
9.
Growth (%)
Revenues
Net Income
EPSx Margin Analysis
Gross Margin
Operating Margin
Last
Qtr.
44.8
349.6
327
50.8%
13.7%
12
51
15
17
51
15X
Recent Acquisitions x 03/2011 - Provigent Ltd. $313M in cash
SoC solutions for wireless reception and
transmission
11/2010 - Gigle Networks$75M in cash
Multimedia home networking
10/2010 - Beceem Communication $316M in cash
4G LTE/WiMax expertise
06/2010 - Innovision Research &
Technology plc $47.5M in cash
Near field communication expertise and
02/2010 – Teknovus$123M in cash
Ethernet Passive Optical Network (EPON
chipsets and software
Recent Highlights
Broadcom had a strong year in 2010 and delivered a record revenue performance
($6.82B), which was a 51.8% increase year over year.
Strong sales growth in mobile products was the key driver for Broadcom’s solid
financials. Broadcom secured key design wins in hot consumer electronic devices like
the iPad 2.
Growth through acquisitions remained one of Broadcom’s key focus areas in 2010. The
company made four deals totaling $561M. Successfully integrating these acquisitions
will be a key challenge for management going forward.
4G and LTE infrastructure build out are a crucial component to the company’s long-term
success. Several strategic acquisitions position Broadcom to make more inroads into
this market.
8/7/2019 Techinsidr.com - Broadcom Equity Research
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Analyst Report | April 19, 2011 | Symbol: BRCM
Broadcom Corporation Techinsidr.com
This report is for i nformation purposes only and should not be considered a solicitation to buy or sell any security. Neither Techinsidr.com nor any other party guarantees its accuracy or makes warrantiesregarding results from its usage. Redistribution is prohibited without the express written consent of Techinsidr.com All rights reserved.
Revenue Breakdown Key Competitors QUALCOMM Corporation (QCOM) The leading fabless semiconductor
company. Occupies one of the top
positions in the lucrative mobile phone
market.
Marvell Technology Group (MRVL) Direct competitor. Major supplier of SoC
solutions used in mobile phones, HDDs, an
wireless LAN equipment.
Texas Instruments Inc (TXN) One of the largest semiconductors. Key
focus areas include HDTVs, projectors, and
mobile phones.
STMicroelectronics (STM)Most direct competitor. Produces the
same products as BRCM, including mobile
phones, set top boxes, and networking.
Conexant Systems (CNXT) Smaller competitor, but one of BRCM’s
main competitors in set-top boxes for TV’s
and digital cable boxes.
Business Segment Analysis
Broadcom delivered strong revenue growth in 2010, accumulating $6.81B in revenue during the fiscal year. The
revenue was split among the 4 key business segments that Broadcom operates in. The mobile segment was the key
force behind Broadcom’s strong financial results. The surge in demand for smartphone and tablet wireless chips helped
boost their mobile revenues to record levels.
Mobile & Wireless Out of all the business segments, Mobile &
Wireless was the strongest performer. For the 2010 fiscal year, the
Mobile & Wireless group generated 42.4% of the total revenues.
Broadcom is one of the top providers of low, lower, high
performance, System-on-Chip solutions that power some of the most
popular smartphones and tablets. One key advantage is their
diversified set of mobile products. Since Broadcom can offer a
variety of different SoC solutions, it allows them to take up a greater
share of the overall bill-of-material or BOM cost.
Some of the latest design wins for Broadcom include the GPS / Wi-Fi chip for the Apple iPad 2. Mobile revenues are
expected to grow and Android Tablets could be another huge opportunity for Broadcom. As one of the top SoC
companies in the mobile space, I expect the Mobile & Wireless business to deliver strong results going forward in 2011.
Consumer demand has shifted from PC’s to mobile devices and Broadcom’s diversified SoC portfolio positions them for
strong upside ahead. I expect even more design wins ahead and I am anticipating at least $3.2B in mobile revenues for
2011.
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Analyst Report | April 19, 2011 | Symbol: BRCM
Broadcom Corporation Techinsidr.com
This report is for i nformation purposes only and should not be considered a solicitation to buy or sell any security. Neither Techinsidr.com nor any other party guarantees its accuracy or makes warrantiesregarding results from its usage. Redistribution is prohibited without the express written consent of Techinsidr.com All rights reserved.
Broadband Communications Group This group is responsible for selling consumer-oriented broadband solutions.
Broadcom produces tiny chips that go inside products like set-top-boxes, media servers, residential gateways, home
networking, high definition TV platforms, Blu-ray Disc® players, and digital video recorders (DVRs). Broadcom enjoyed a
strong year from this business segment, booking $2.1B in revenue from these productscategories. Broadcom SoC technology powers some of hottest home networking products
from OEMs like Linksys and Netgear. The average consumer’s home is getting much more
digital and Broadcom is a key beneficiary of this movement. More consumers are making
the transition to HDTV and they are buying more advanced set top boxes as a result. Home
entertainment solutions remained popular amongst consumers who are looking to cut the
cord from cable and avoid spending $9.25 on movie tickets. The rise in popularity for
Internet-connected TV systems like the Boxee Box, Netflix Roku Player, and Google TV helped
drive Broadcom’s strong results in this segment.
Infrastructure & Networking Broadcom’s corporate strategy hinges on a
steady infrastructure buildout for 4G, Wi-Max, and LTE. Some of their
key products include switches and physical layer devices, wide area and
storage networking, and high-speed controllers. The company’s
Infastructure & Networking group provides solutions for carriers, service
providers, enterprises, small-to-medium businesses and data centers. for
network infrastructure needs. The company offers a range of switches,
controllers, copper transceivers, and security processors. Some of
Broadcom’s key clients in this segment include Dell, C isco, Apple, HP, Motorola, Netgear, and Samsung. Their wide
portfolio of wireless and wired solutions allows Broadcom to establish strategic relationships with some of the premiertech companies. With the large scale 4G / LTE buildout gaining momentum, Broadcom stands to benefit in this space.
Recent Merger & Acquisition Analysis
Acquisitions are an integral part of Broadcom’s strategy to grow revenues and expand into new business segments.
Broadcom recently closed a $313M acquisition of Israeli chipmaker Provigent Ltd. This move will help Broadcom expand
its portfolio and move into the $5B microwave backhaul equipment business. In 2010, Broadcom completed four
acquisitions totaling $561M.
A notable acquisition is the purchase of NFC upstart Innovision Research & Technology plc. This move provides
Broadcom inroads into the hot NFC market with the likes of NXP Semiconductors and Qualcomm Inc. If Broadcom can
integrate quickly and accelerate their NFC roadmap, it gives them a chance to be a first mover in this lucrative market.
Although they tend to fly under the radar in this area, Broadcom does have a viable NFC solution in their pipeline.
If Broadcom can deliver a compelling NFC product to the market before Qualcomm and NXPI, it will be a huge
incremental growth catalyst to their mobile business.
8/7/2019 Techinsidr.com - Broadcom Equity Research
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Analyst Report | April 19, 2011 | Symbol: BRCM
Broadcom Corporation Techinsidr.com
This report is for i nformation purposes only and should not be considered a solicitation to buy or sell any security. Neither Techinsidr.com nor any other party guarantees its accuracy or makes warrantiesregarding results from its usage. Redistribution is prohibited without the express written consent of Techinsidr.com All rights reserved.
Risk Factors
Broadcom is the second ranked fabless semiconductor in terms of revenue, but competition in this sector is very stiff.
Although the company ranks 1 or 2 in terms of market share for each of their respective markets, they face steady
competition from rivals like Qualcomm and STMicroelectronics. Due to their broad and diverse product portfolio,
Broadcom faces constant competitive threats in many different markets from both small and large competitors.
Another risk factor is the growing operating expenses that caught Wall Street by surprise in Q4 2010. A rise in stock
based compensation expenses dragged on Broadcom’s earnings in Q4 and are expected to continue in 2011. If
Broadcom does not exercise tighter managerial control over these costs, higher op-ex will continue to dilute EPS.
Analysis and Recommendation
Broadcom delivered strong results in 2010 and I look for this trend to continue as the market for mobile and SoC
solutions continues to accelerate. Competition is stiff, particularly from Qualcomm and STMicroelectronics, but even
with the tough competition I expect Broadcom to deliver year in 2011. Their expansive portfolio of System-on-Chip
solutions gives them a unique competitive advantage that other companies in this sector cannot match.
An aggressive approach to acquisitions is a key strength for the Broadcom, but successfully integrating these companies
will remain a challenge. Even though integrating these pieces will be difficult, I think Broadcom has taken the right
approach by using this aggressive “growth by acquisition” strategy.
Strong sales of multi-functional wireless chips (Wifi/Bluetooth/GPS) will continue to drive additional revenue growth in
the years ahead. If Broadcom can successfully integrate a NFC chip into this package, it will be a big growth catalyst for
the company. Given all these factors, I maintain that Broadcom (BRCM) is a Buy.
BRCM shares have underperformed major indexes and lagged behind their competitors so far in 2011, but I still view
Broadcom as one of the premier companies in their industry. Broadcom has steadily grown their market share and they
should continue to outpace their industry peers over the next few years.