Looks like someone agrees with me?
"Our short-selling source thinks the company will easily meet the Street's expected number of 31 cents per share, and even make the March quarter. But he argues that it's already reflected in the stock -- at least the stock of a company with centerpiece businesses that have either stopped growing and/or are under siege by competition."
and......
"The story is much the same on the networking side, where Marvell Technology> (MRVL) has been winning Broadcom customers (with a much lower-priced product) for about six months. Design wins take around six to 12 months to translate into production, the short says, which means Broadcom should start feeling that pain fairly soon.
Finally (and perhaps most importantly to the short-seller), there's the issue of acquisitions: Broadcom has been using its high-priced stock to make a string of deals -- around $6 billion worth since July 2000. The acquisitions, the short says, are a sign that Broadcom's organic growth, from its core markets, is slowing.
To which Broadcom CEO Bill Ruehle says: "If you're suggesting that our basic markets are slowing down and therefore Broadcom is slowing down, that could've been predicted two years ago, 18 months ago and a year ago. It could've been predicted... that therefore we would be falling off a cliff. But instead of falling off a cliff, we've been doubling our revenues every year. What that proposition has missed is how we define our markets, and we define them as changing and growing."
Perhaps, but on Wednesday, Thomas Weisel Partners picked up coverage of set-top boxmaker Scientific-Atlanta (SFA) with a market perform. The firm cited expected "linear rates" of growth "due to the natural limits of digital-cable market penetration." Won't that slowdown affect suppliers like Broadcom?
"Only if the supplier is standing still," says Ruehle, who gets high marks for taking my call during a time when most companies would bow out, by crying quiet period. He adds that the international market is in its infancy, and there's still plenty of room for growth in the U.S. as broadband applications expand.
Meanwhile, doesn't the rise in acquisitions suggest the company's core biz is slowing? "That's a negative way of looking at it," Ruehle says. He says the acquisitions are generally either enhancements to existing products or entries into new industries. Last year, for example, Broadcom bought NewPort Communications, which develops optical chips. Through NewPort, he says, Broadcom fully expects to take design wins from the likes of Applied Micro Circuits> (AMCC) "that won't show in the P&L for a couple of quarters, but will dramatically by the end of the year and into next year."
To which the short-seller says: "Proof its core business is slowing."
Two sides. Two compelling arguments. May the best man win." |
