Conference Call to be Webcast Today at 1:45 p.m. Pacific Time
IRVINE, Calif., Oct. 21 /PRNewswire-FirstCall/ -- Broadcom Corporation (NASDAQ: BRCM) today reported unaudited financial results for its third quarter ended September 30, 2008.
Net revenue for the third quarter of 2008 was $1.298 billion, an increase of 8.1% compared with the $1.201 billion reported for the second quarter of 2008 and an increase of 36.7% compared with the $950.0 million reported for the third quarter of 2007. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2008 was $164.9 million, or $.31 per share (diluted), compared with GAAP net income of $134.8 million, or $.25 per share (diluted), for the second quarter of 2008, and GAAP net income of $27.8 million, or $.05 per share (diluted), for the third quarter of 2007.
Net revenue for the nine months ended September 30, 2008 was $3.532 billion, an increase of 28.5% from the $2.749 billion reported for the nine months ended September 30, 2007. Net income computed in accordance with GAAP for the nine months ended September 30, 2008 was $374.0 million, or $.70 per share (diluted), compared with GAAP net income of $123.0 million, or $.21 per share (diluted), for the nine months ended September 30, 2007.
Net revenue for the nine months ended September 30, 2008 included royalties of $109.2 million received pursuant to a patent license agreement entered into in July 2007. The royalty received in the second and third quarters of 2008 was $35.6 million and $38.0 million, respectively.
"The third quarter was a great quarter for Broadcom. We achieved record revenue and cash flow from operations, and demonstrated our commitment to deliver profitable growth," said Scott A. McGregor, Broadcom's President & Chief Executive Officer. "As in prior economic slowdowns, we expect to enhance our competitive positioning and drive the next wave of communications convergence. The widespread acceptance of our combination solutions validates our strategy, and together with our rapid transition to 65nm process technology, should enable us to emerge in a much stronger position when the economy recovers."
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its third quarter 2008 financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The company will broadcast the conference call via webcast over the Internet. To listen to the webcast, or to view the financial or other statistical information required by Securities and Exchange Commission (SEC) Regulation G, please visit the Investors section of the Broadcom website at http://www.broadcom.com/investors. Please note that we have added additional information to this presentation regarding our revenue, gross margin and operating expenses. The webcast will be recorded and available for replay until 5:00 p.m. Pacific Time, Tuesday, November 4, 2008.
About Broadcom
Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications. Broadcom(R) products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. We provide the industry's broadest portfolio of state-of-the-art system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. These solutions support our core mission: Connecting everything(R).
Broadcom is one of the world's largest fabless semiconductor companies, with 2007 revenue of $3.78 billion, and currently holds more than 2,900 U.S. and 1,300 foreign patents, more than 7,600 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video, data and multimedia.
Broadcom is headquartered in Irvine, Calif., and has offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at +1.949.926.5000 or at http://www.broadcom.com.
Cautions regarding Forward Looking Statements:
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward- looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to, guidance provided on future revenue, gross margin and operating expense targets for the fourth quarter of 2008 and references to our ability to emerge in a stronger position when the economy recovers. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.
These risks and uncertainties include, but are not limited to:
-- general economic and political conditions and specific conditions in
the markets we address, including the continuing volatility in the
technology sector and semiconductor industry, current general economic
volatility, trends in the broadband communications markets in various
geographic regions, including seasonality in sales of consumer
products into which our products are incorporated, and possible
disruption in commercial activities related to terrorist activity or
armed conflict;
-- the timing, rescheduling or cancellation of significant customer
orders and our ability, as well as the ability of our customers, to
manage inventory;
-- our dependence on a few significant customers for a substantial
portion of our revenue;
-- the gain or loss of a key customer, design win or order;
-- the rate at which our present and future customers and end-users adopt
Broadcom's technologies and products in our target markets;
-- our ability to specify, develop or acquire, complete, introduce,
market and transition to volume production new products and
technologies in a cost-effective and timely manner;
-- risks and uncertainties resulting from Broadcom's equity award review,
including potential claims and proceedings related to such matters,
such as shareholder litigation and any action by the SEC, U.S.
Attorney's Office or other governmental agency that has resulted in,
and could result in further civil or criminal sanctions against the
company and/or certain of our current or former officers, directors or
employees, or other actions taken or required as a result of the
review, and the extent to which we are able to receive reimbursement
of our expenses related to such litigation and actions through our
directors' and officers' insurance carriers. In the event that the
company's coverage under these policies is reduced or denied, our
financial exposure would be increased;
-- our ability to retain, recruit and hire key executives, technical
personnel and other employees in the positions and numbers, with the
experience and capabilities, and at the compensation levels needed to
implement our business and product plans;
-- intellectual property disputes and customer indemnification claims and
other types of litigation risk;
-- the effectiveness of our expense and product cost control and
reduction efforts;
-- our ability to scale our operations in response to changes in demand
for our existing products and services or demand for new products
requested by our customers;
-- the risks inherent in acquisitions of technologies and businesses,
including the timing and successful completion of technology and
product development through volume production, integration issues,
potential contractual, intellectual property or employment issues, the
risk that anticipated benefits of the acquisition may not be realized,
and accounting treatment and charges;
-- the availability and pricing of third party semiconductor foundry,
assembly and test capacity and raw materials;
-- the quality of our products and any potential remediation costs;
-- competitive pressures and other factors such as the qualification,
availability and pricing of competing products and technologies and
the resulting effects on sales and pricing of our products;
-- changes in our product or customer mix;
-- the volume of our product sales and pricing concessions on volume
sales;
-- our ability to timely and accurately predict market requirements and
evolving industry standards and to identify opportunities in new
markets;
-- the risks of producing products with new suppliers and at new
fabrication and assembly and test facilities;
-- problems or delays that we may face in shifting our products to
smaller geometry process technologies and in achieving higher levels
of design integration;
-- delays in the adoption and acceptance of industry standards in our
target markets;
-- the timing of customer-industry qualification and certification of our
products and the risks of non-qualification or non-certification;
-- fluctuations in the manufacturing yields of our third party
semiconductor foundries and other problems or delays in the
fabrication, assembly, testing or delivery of our products;
-- the risks and uncertainties associated with our international
operations, particularly in light of terrorist activity, armed
conflict or political unrest; and
-- the level of orders received that can be shipped in a fiscal quarter.
Our Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements in this release and the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement, except as required by law.
Broadcom(R), the pulse logo, Connecting everything(R) and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners.
Broadcom Trade Press Contact Broadcom Investor Relations
Bill Blanning T. Peter Andrew
Vice President, Vice President,
Global Media Relations Corporate Communications
949-926-5555 949-926-5663
blanning@broadcom.com andrewtp@broadcom.com
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2008(a) 2007 2008(a) 2007
Net revenue $1,298,475 $ 949,959 $3,531,616 $2,749,360
Cost of revenue 619,459 465,970 1,655,218 1,343,956
Gross profit 679,016 483,989 1,876,398 1,405,404
Operating expense:
Research and development 379,279 352,283 1,115,002 985,223
Selling, general and
administrative 141,941 124,907 395,904 373,413
Amortization of purchased
intangible assets 183 314 550 843
In-process research and
development - 4,970 10,900 15,470
Impairment of other
intangible assets 250 - 2,150 1,500
Settlement costs - - 15,810 -
Restructuring costs
(reversal) - - (1,000) -
Income from operations 157,363 1,515 337,082 28,955
Interest income, net 12,451 31,443 44,983 101,355
Other expense, net (3,720) (1,670) (2,987) (2,437)
Income before income taxes 166,094 31,288 379,078 127,873
Provision for income taxes 1,188 3,528 5,069 4,866
Net income $ 164,906 $ 27,760 $ 374,009 $ 123,007
Net income per share
(basic) $ .32 $ .05 $ .72 $ .23
Net income per share
(diluted) $ .31 $ .05 $ .70 $ .21
Weighted average shares
(basic) 509,041 539,931 517,418 542,881
Weighted average shares
(diluted) 523,759 577,583 531,187 579,479
(a) Includes royalties in the amount of $38.0 million and $109.2 million
in the three and nine months ended September 30, 2008, respectively,
received pursuant to a patent license agreement entered into in July
2007.
The following table presents details of total stock-based compensation expense included in each functional line item in the unaudited condensed consolidated statements of income above:
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Cost of revenue $ 6,652 $ 7,214 $ 18,354 $ 19,889
Research and development 93,334 94,619 262,043 263,882
Selling, general and
administrative 33,328 37,023 93,661 106,256
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Operating activities
Net income $ 164,906 $ 27,760 $ 374,009 $ 123,007
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 19,370 14,897 54,929 42,555
Stock-based compensation expense:
Stock options and other
awards 53,684 84,128 168,891 249,326
Restricted stock units
issued by the company 79,630 54,728 205,167 140,701
Acquisition-related items:
Amortization of purchased
intangible assets 4,118 4,249 12,354 10,394
In-process research and
development - 4,970 10,900 15,470
Impairment of intangible
assets 250 - 2,150 1,500
Impairment of strategic
investments and marketable
securities 4,287 2,121 6,047 4,769
Changes in operating assets
and liabilities:
Accounts receivable (21,183) (11,509) (131,998) (8,330)
Inventory (66,259) (20,399) (91,292) (8,929)
Prepaid expenses and
other assets (20,387) (24,964) (1,629) (41,610)
Accounts payable 23,503 44,547 147,332 55,149
Accrued settlement
liabilities - - (2,000) (2,000)
Other accrued and
long-term liabilities 44,330 30,507 17,757 30,800
Net cash provided by
operating activities 286,249 211,035 772,617 612,802
Investing activities
Net purchases of property and
equipment (16,084) (15,939) (65,151) (123,318)
Net cash paid for acquisitions
and other purchased intangible
assets (57) (141,372) (29,795) (219,324)
Purchases of strategic
investments - - (355) (3,194)
Purchases of marketable
securities (772,012) (112,732) (1,109,673) (568,462)
Proceeds from sales and
maturities of marketable
securities 291,424 156,960 512,022 821,092
Net cash used in
investing activities (496,729) (113,083) (692,952) (93,206)
Financing activities
Repurchases of Class A
common stock (23,912) (170,534) (859,775) (811,822)
Minimum tax withholding
paid on behalf of employees
for restricted stock units (19,433) (16,453) (45,186) (53,032)
Proceeds from issuance of
common stock, net 23,968 81,912 114,582 224,362
Net cash used in
financing activities (19,377) (105,075) (790,379) (640,492)
Decrease in cash and
cash equivalents (229,857) (7,123) (710,714) (120,896)
Cash and cash equivalents
at beginning of period 1,705,715 2,044,337 2,186,572 2,158,110
Cash and cash equivalents
at end of period $1,475,858 $2,037,214 $1,475,858 $2,037,214
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
September 30, June 30, December 31,
2008 2008 2007
(In thousands)
Cash and cash equivalents $ 1,475,858 $ 1,705,715 $ 2,186,572
Short-term marketable securities 770,872 228,418 141,728
Long-term marketable securities 40,905 105,513 75,352
Total cash, cash equivalents and
marketable securities $ 2,287,635 $ 2,039,646 $ 2,403,652
Increase from prior quarter end $ 247,989
Decrease from prior year end $ (116,017)
BROADCOM CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $ 1,475,858 $ 2,186,572
Short-term marketable securities 770,872 141,728
Accounts receivable, net 501,015 369,004
Inventory 322,605 231,313
Prepaid expenses and other current assets 105,481 125,663
Total current assets 3,175,831 3,054,280
Property and equipment, net 252,999 241,803
Long-term marketable securities 40,905 75,352
Goodwill 1,386,394 1,376,721
Purchased intangible assets, net 34,253 46,607
Other assets 58,293 43,430
Total assets $ 4,948,675 $ 4,838,193
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 459,593 $ 313,621
Wages and related benefits 166,137 147,853
Deferred revenue 10,246 15,864
Accrued liabilities 238,010 253,226
Total current liabilities 873,986 730,564
Commitments and contingencies
Long-term deferred revenue 4,764 8,108
Other long-term liabilities 65,879 63,373
Shareholders' equity 4,004,046 4,036,148
Total liabilities and shareholders'
equity $ 4,948,675 $ 4,838,193
BROADCOM CORPORATION
Unaudited Supplementary Financial Data
(In thousands)
The following table presents details of supplementary financial data
included in each functional line item in the unaudited condensed consolidated
statements of income:
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Cost of revenue:
Stock-based compensation $ 6,652 $ 7,214 $ 18,354 $ 19,889
Amortization of purchased
intangible assets 3,935 3,935 11,804 9,551
Research and development:
Stock-based compensation 93,334 94,619 262,043 263,882
Selling, general and administrative:
Stock-based compensation 33,328 37,023 93,661 106,256
Recovery of legal fees related to
Qualcomm litigation - - (8,569) -
Other operating expense:
Amortization of purchased
intangible assets 183 314 550 843
In-process research and development (1) - 4,970 10,900 15,470
Impairment of intangible assets 250 - 2,150 1,500
Restructuring costs (reversal) - - (1,000) -
Settlement costs (2) - - 15,810 -
Other:
Employer payroll tax expense on
certain stock option exercises 1,532 1,484 3,631 4,304
Charges related to equity award review - - - 3,409
Impairment of strategic investments 2,506 2,121 4,266 4,769
Non-operating gains (193) (146) (193) (275)
(1) Recorded in connection with the company's acquisition of Sunext
Design, Inc. in the nine months ended September 30, 2008 and in
connection with the company's acquisition of LVL7 Systems, Octalica,
Inc. and Global Locate, Inc. in the nine months ended September 30,
2007.
(2) Recorded accrued settlement costs included $12.0 million related to
Broadcom's settlement with the Securities and Exchange Commission as
well as $3.8 million related to a patent infringement claim
settlement in the nine months ended September 30, 2008.
BROADCOM CORPORATION
Guidance for the Three Months Ending December 31, 2008
Three Months
Ending December 31, 2008*
Net revenue $1,170 to $1,235 million
Gross margin Down 50 to 75 basis points sequentially
Total operating expense
(including stock-based compensation) Up $12 to $17 million sequentially
Total stock-based compensation** Approximately $130 million
* Excludes the impact of the proposed AMD transaction.
** Included in cost of revenue, research and development, and selling
general and administrative expenses.
Broadcom has based the preceding guidance for the three months ending December 31, 2008 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of October 21, 2008. Our guidance consists of predictions only, however, and is subject to a wide range of known and unknown business risks and uncertainties, many of which are beyond our control. The forecasts and projections contained in the table above should not be regarded as representations by Broadcom that the estimated results will be achieved. Projections and estimates are necessarily speculative in nature and actual results may vary materially from the guidance we provide today.
The guidance set forth in the table above should be read together with the information under the caption, "Cautions regarding Forward Looking Statements" above, our Annual Report on Form 10-K for the year ended December 31, 2007, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other Securities and Exchange Commission filings. We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein.
Web site: http://www.broadcom.com/