Broadcom Reports Third Quarter 2010 Results

Record Quarterly Net Revenue -- Up 44% from Prior Year

Record Quarterly Earnings

Conference Call to be Webcast Today at 1:45 p.m. Pacific Time

Oct 26, 2010, 16:05 ET from Broadcom Corporation from ,BRCM Corporate

IRVINE, Calif., Oct. 26 /PRNewswire-FirstCall/ --

Q3 Summary

  • Revenue: $1.806 billion (up 44% year over year)
  • Gross Margin: 51.7% (Product Gross Margin: 50.1%)
  • Operating Margin: 18.5%
  • Net Income: $327 million
  • Earnings per Share:  $0.60 (up 275% year over year)
  • Cash Flow from Operations: $456 million

Broadcom Corporation (Nasdaq: BRCM) today reported unaudited financial results for its third quarter ended September 30, 2010.

Net revenue for the third quarter of 2010 was a record $1.806 billion. This represents an increase in net revenue of 12.6% compared with the $1.604 billion reported for the second quarter of 2010 and an increase of 44% compared with the $1.254 billion reported for the third quarter of 2009. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2010 was $327 million, or $.60 per share (diluted), compared with GAAP net income of $278 million, or $.52 per share (diluted), for the second quarter of 2010, and GAAP net income of $85 million, or $.16 per share (diluted), for the third quarter of 2009.

Net revenue for the nine months ended September 30, 2010 was $4.873 billion. This represents an increase in net revenue of 54.8% from the $3.148 billion reported for the nine months ended September 30, 2009. Net income computed in accordance with GAAP for the nine months ended September 30, 2010 was $816 million, or $1.52 per share (diluted), compared with GAAP net income of $6 million, or $.01 per share (diluted), for the nine months ended September 30, 2009.

For a discussion of certain selected transactions and their related accounting impact for all periods presented, see the "Unaudited Supplementary Financial Data" schedule below.

"Broadcom continues to execute exceptionally well with record revenue and earnings in the third quarter of 2010. I am particularly pleased that we had record sales in each of our segments and reached our GAAP product operating margin model of 15% - 17%. These achievements are due to solid growth in our wired and wireless communication businesses, powerfully engineered products and Broadcom's continued commitment to financial discipline," said Scott A. McGregor, Broadcom's President and Chief Executive Officer.

"Looking ahead, we believe that consumer demand for connectivity will continue to drive demand for our communication semiconductors, which should enable Broadcom to deliver solid revenue growth and sustained profitability in the fourth quarter."

Conference Call Information

As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its third quarter 2010 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 and other statistical information required by Securities and Exchange Commission (SEC) Regulation G, please visit the Investors section of the Broadcom website at www.broadcom.com/investors.  The webcast will be recorded and available for replay until 5:00 p.m. Pacific Time, November 23, 2010.

The financial results included in this release are unaudited.

About Broadcom

Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications.  Broadcom® 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®.

Broadcom, one of the world's largest fabless communications semiconductor companies, with 2009 revenue of $4.49 billion, holds more than 4,500 U.S. and 1,900 foreign patents, and has more than 7,800 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video, data and multimedia.

A FORTUNE 500® company, 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 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 product margin and operating expense targets for the fourth quarter of 2010, references to the positioning of our products and statements about opportunities within the wired and wireless communication markets and the continuing demand for connectivity and communication semiconductors. 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 the following:

  • Our operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in the markets we address.
  • Our quarterly operating results may fluctuate significantly.
  • Our stock price is highly volatile.
  • We face intense competition.
  • We depend on a few significant customers for a substantial portion of our revenue.
  • We may fail to adjust our operations in response to changes in demand.
  • We face risks associated with our acquisition strategy.
  • We may be required to defend against alleged infringement of intellectual property rights.
  • We may not be able to protect or enforce our intellectual property rights.
  • Our business is subject to potential tax liabilities.
  • We are involved in litigation.
  • We manufacture and sell complex products and may be unable to successfully develop and introduce new products.
  • We are subject to order and shipment uncertainties.
  • We are increasingly exposed to risks associated with our international operations.
  • We depend on third-party subcontractors to fabricate, assemble and test our products.
  • Government regulation may adversely affect our business.
  • We may be unable to attract, retain or motivate key personnel.
  • Our co-founders and their affiliates may control the outcome of matters that require the approval of our shareholders.
  • There can be no assurance that we will continue to declare cash dividends.
  • Our articles of incorporation and bylaws contain anti-takeover provisions.

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®, the pulse logo, Connecting everything®, 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 CORPORATION

Unaudited Condensed Consolidated Statements of Income

(In thousands, except per share amounts)




Three Months Ended

September 30,

Nine Months Ended

September 30,


2010

2009

2010

2009

Net revenue:





Product revenue

$  1,748,692

$  1,194,745

$  4,700,131

$  2,989,292

Income from Qualcomm Agreement

51,674

51,674

155,022

118,937

Licensing revenue

5,651

7,778

17,611

39,348

Total net revenue

1,806,017

1,254,197

4,872,764

3,147,577

Costs and expenses:





Cost of product revenue

871,951

615,349

2,328,502

1,580,300

Research and development

447,577

391,170

1,290,063

1,138,664

Selling, general and administrative

145,849

142,480

421,844

394,938

Amortization of purchased intangible assets

4,405

4,159

12,892

12,457

Impairment of other long-lived assets

1,785

7,634

1,785

18,895

Restructuring costs, net

--

4,772

111

12,330

Settlement costs (gains), net

--

--

3,816

(57,256)

Charitable contribution

--

--

--

50,000

Total operating costs and expenses

1,471,567

1,165,564

4,059,013

3,150,328

Income (loss) from operations

334,450

88,633

813,751

(2,751)

Interest income, net

3,180

2,978

8,042

11,362

Other income (expense), net

(1,113)

(178)

3,679

2,487

Income before income taxes

336,517

91,433

825,472

11,098

Provision for income taxes

9,388

6,837

9,861

5,041

Net income

$  327,129

$  84,596

$  815,611

$  6,057

Net income per share (basic)

$  0.64

$  0.17

$  1.63

$  0.01

Net income per share (diluted)

$  0.60

$  0.16

$  1.52

$  0.01

Weighted average shares (basic)

508,957

495,491

501,835

493,599

Weighted average shares (diluted)

544,251

521,443

536,572

508,559






Dividends per share

$  0.08

$  --

$  0.24

$ --




Certain prior period amounts in the unaudited condensed consolidated statements of income have been reclassified to conform with the current period presentation of income from the Qualcomm Agreement and licensing revenue.

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

September 30,

Nine Months Ended

September 30,


2010

2009

2010

2009

Cost of product revenue

$    5,122

$    6,579

$  16,850

$  18,584

Research and development

80,171

90,829

252,977

266,698

Selling, general and administrative

27,927

31,290

88,647

89,817




BROADCOM CORPORATION

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)




Three Months Ended

September 30,

Nine Months Ended

September 30,


2010

2009

2010

2009

Operating activities





Net income

$  327,129

$  84,596

$  815,611

$  6,057

Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization

19,716

11,273

57,970

47,314

Stock-based compensation expense:





Stock options and other awards

23,623

40,904

87,131

126,461

Restricted stock units

89,597

87,794

271,343

248,638

Acquisition-related items:





Amortization of purchased intangible assets

11,820

8,035

36,074

24,558

Impairment of long-lived assets

1,785

7,634

1,785

18,895

Non-cash restructuring charges (reversals)

--

808

(313)

2,721

Gain on sale of marketable securities

--

--

--

(1,046)

Changes in operating assets and liabilities:





Accounts receivable

(108,793)

(97,541)

(284,063)

(169,276)

Inventory

(44,803)

(27,918)

(165,081)

58,890

Prepaid expenses and other assets

11,615

27,758

35,103

19,972

Accounts payable

26,786

32,764

128,992

112,525

Deferred revenue and income

(9,137)

(19,944)

(27,983)

80,822

Accrued settlement costs

(3,000)

--

(166,380)

6,900

Other accrued and long-term liabilities

109,373

80,301

129,132

71,534

Net cash provided by operating activities

455,711

236,464

919,321

654,965

Investing activities





Net purchases of property and equipment

(34,571)

(22,480)

(82,030)

(48,774)

Net cash received from (paid for) acquired companies

(47,916)

(1,297)

(150,398)

842

Purchases of strategic investments

--

(2,000)

(8,000)

(2,000)

Purchases of marketable securities

(933,519)

(546,922)

(1,416,736)

(1,057,972)

Proceeds from sales and maturities of marketable securities

351,661

315,532

722,460

737,377

Net cash used in investing activities

(664,345)

(257,167)

(934,704)

(370,527)

Financing activities





Repurchases of Class A common stock

--

(168,083)

(275,464)

(206,517)

Dividends paid

(40,867)

--

(120,680)

--

Payment of assumed debt

--

--

(14,560)

--

Proceeds from issuance of common stock

125,815

53,535

371,683

137,229

Minimum tax withholding paid on behalf of employees for restricted stock units

(34,007)

(26,046)

(96,749)

(60,574)

Net cash provided by (used in) financing activities

50,941

(140,594)

(135,770)

(129,862)

Increase (decrease) in cash and cash equivalents

(157,693)

(161,297)

(151,153)

154,576

Cash and cash equivalents at beginning of period

1,403,633

1,506,518

1,397,093

1,190,645

Cash and cash equivalents at end of period

$  1,245,940

$  1,345,221

$  1,245,940

$  1,345,221




UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION



September 30,

2010

June 30,

2010

December 31,

2009


(In thousands)

Cash and cash equivalents

$  1,245,940

$  1,403,633

$  1,397,093

Short-term marketable securities

1,148,139

644,722

532,281

Long-term marketable securities

520,276

441,111

438,616

Total cash, cash equivalents and marketable securities

$  2,914,355

$  2,489,466

$  2,367,990

Increase from prior period end

$  424,889



Increase from prior year end

$  546,365






BROADCOM CORPORATION

Unaudited Condensed Consolidated Balance Sheets

(In thousands)




September 30,

2010

December 31,

2009

ASSETS



Current assets:



Cash and cash equivalents

$  1,245,940

$  1,397,093

Short-term marketable securities

1,148,139

532,281

Accounts receivable, net

798,266

508,627

Inventory

534,855

362,428

Prepaid expenses and other current assets

105,661

113,903

Total current assets

3,832,861

2,914,332

Property and equipment, net

253,339

229,317

Long-term marketable securities

520,276

438,616

Goodwill

1,410,542

1,329,614

Purchased intangible assets, net

205,183

150,927

Other assets

50,810

64,436

Total assets

$  6,273,011

$  5,127,242

LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:



Accounts payable

$  567,822

$  437,353

Wages and related benefits

193,216

190,315

Deferred revenue and income

59,221

87,388

Accrued liabilities

404,260

433,294

Total current liabilities

1,224,519

1,148,350

Long-term deferred revenue

792

608

Other long-term liabilities

85,240

86,438

Commitments and contingencies

Shareholders' equity

4,962,460

3,891,846

Total liabilities and shareholders' equity

$  6,273,011

$  5,127,242




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

September 30,

Nine Months Ended

September 30,


2010

2009

2010

2009

Cost of product revenue:





Stock-based compensation

$  5,122

$  6,579

$  16,850

$  18,584

Amortization of purchased intangible assets

7,415

3,876

23,182

12,101

Amortization of acquired inventory valuation step-up

264

699

6,929

7,679






Research and development:





Stock-based compensation

80,171

90,829

252,977

266,698






Selling, general and administrative:





Stock-based compensation

27,927

31,290

88,647

89,817






Other operating costs and expenses:





Amortization of purchased intangible assets

4,405

4,159

12,892

12,457

Impairment of long-lived assets(1)

1,785

7,634

1,785

18,895

Restructuring costs, net(2)

--

4,772

111

12,330

Settlement costs (gains), net(3)

--

--

3,816

(57,256)

Charitable contribution(4)

--

--

--

50,000






Other:





Employer payroll tax expense on certain stock option exercises

2,364

1,625

6,125

3,567

Non-operating gain (loss)

(422)

27

(426)

13

(1)  Long-lived asset impairment charges of $7.6 million and $18.9 million related to the company's acquisition of the digital television business of Advanced Micro Devices, Inc. were recorded in the three and nine months ended September 30, 2009.


(2)  Recorded in connection with the company's restructuring plans implemented in 2009.


(3)  In the nine months ended September 30, 2009, the company recorded a $65.3 million gain on settlement in connection with the Qualcomm litigation, offset in part by estimated additional settlement costs of $6.9 million related to certain employment tax items and an additional $1.2 million related to patent infringement claims.


(4)  Recorded in connection with an accrued $50.0 million charitable contribution to the Broadcom Foundation in the nine months ended September 30, 2009.



BROADCOM CORPORATION

Unaudited Supplementary Financial Data

(In thousands)


Three Months Ended


September 30, 2010

September 30, 2009

June 30, 2010

Product revenue

$  1,748,692

$  1,194,745

$  1,547,095

Income from Qualcomm Agreement

51,674

51,674

51,674

Licensing revenue

5,651

7,778

5,679

Total net revenue

$  1,806,017

$  1,254,197

$  1,604,448

Cost of product revenue

$  871,951

$  615,349

$  761,229

Product gross margin

50.1%

48.5%

50.8%

Total gross margin

51.7%

50.9%

52.6%




BROADCOM CORPORATION

Guidance for the Three Months Ending December 31, 2010


Three Months

Ending December 31, 2010

Total net revenue

Flat to up ~$100 million from Q3 for a total net revenue range of $1.8 billion to $1.9 billion



Product gross margin

Flat from Q3



Research and development and selling, general and administrative expenses (including stock-based compensation).

up ~$20 million to ~$30 million from Q3





Broadcom has based the preceding guidance for the three months ending December 31, 2010 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of October 26, 2010. 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 above table 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, 2009, 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, except as required by law.


Broadcom Business Press Contact
Bill Blanning
Vice President, Global Media Relations
949-926-5555
blanning@broadcom.com

Broadcom Investor Relations Contact
Chris Zegarelli
Director, Investor Relations
949-926-7567
czegarel@broadcom.com




SOURCE Broadcom Corporation; BRCM Corporate



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