Rabu, 23 Juli 2008

SAN FRANCISCO - Broadcom Corp., which designs chips for networking equipment and cell phones, said Tuesday its second-quarter profit nearly quadrupled, beating Wall Street's expectations.

But fears that the company's profit margins will slip in the third quarter, even as revenues rise, sent shares tumbling 5 percent in after-hours trading.

The Irvine, Calif.-based company is in a healthy market, as rising online traffic and demand for Internet video are driving demand for Broadcom's chips, which are used in cable set-top boxes, communications equipment and home networking gear.

That was reflected in Broadcom's second-quarter net income of $134.8 million, or 25 cents per share, a dramatic improvement over the $34.3 million, or 6 cents a share, that Broadcom made in the year-ago period.

That compares with an average estimate of 14 cents per share of analysts surveyed by Thomson Financial.

On a conference call with analysts, executives cautioned that Broadcom's gross profit margin -- the amount of money it makes on every dollar of revenue once manufacturing costs are stripped out -- would likely decline in the third quarter. That overshadowed upbeat sales guidance of $1.25 billion to $1.30 billion, which was above Wall Street's forecasts.

Broadcom's stock fell $1.39 to $26.25. The stock rose 20 cents to close at $27.64 during the regular trading session, before the results were announced.

Broadcom's sales were higher than expected. Broadcom had $1.2 billion in revenue in the three months ended June 30, a 34 percent increase over last year's $897.9 million, and about $100 million above analyst estimates.

Broadcom is also beset by legal problems, with four former executives facing criminal charges over stock options tampering, including co-founders Henry Samueli and Henry T. Nicholas and the company's chief financial officer and human resources chief. Legal battles for former executives often weigh on a company's finances because the company is usually on the hook for paying for their defense.

Samueli last month pleaded guilty to one count of making a false statement to the Securities and Exchange Commission. Sentencing is scheduled for Aug. 18. Nicholas has been indicted on drug and corporate fraud charges. The fraud trial is scheduled to begin April 7, 2009. The drug trial will follow on Nov. 10, 2009.

(This version CORRECTS to state that the results beat Wall Street views).)

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