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Technology Stocks : Broadcom (BRCM)

BRCM 54.67

0.0%

Feb 9 4:00 PM EST

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To: Paul Viapiano who wrote (6273)	8/7/2002 3:52:20 PM
From: uu	Read Replies (1) of 6531

Regarding BRCM's gross margins: CSCO's latest report indicates a 10% jump in gross margins to 67.7% (from 57%). This happened while its sales literally remained flat and is expected to remain flat while forecasting a stady climb in its gross margins! IN fact CSCO has seen a steady climb in its gross margins for the past several quarters while its sales have either declined or remained basically flat. I can not think of anyway for CSCO to be able to increase its gross margines unless it forces its suppliers (the likes of BRCM) to lower their prices. Judging by BRCM's latest earnings report their margins have in fact been going down steadily and sharply from 62.9% in 1999, to 58.2% in 2000, to 53.2% in 2001, to 44.1% for the first six months of this year. If you compare the rate at which this drop has happened to BRCM's customer's gross margins (the likes of CSCO and even the losing Lucent) you notice a direct relationship. CSCO has indicated that it expects for its gross margins to continue to rise (while sales remain flat!)... Guess who is making CSCO look good?! Answer: BRCM ! And if BRCM continues to lose gross margins how on earth, heaven (or for that matter hell) they can ever claim of becoming a profitable company ever?!! But then, becoming a profitable entity may not be in their business charter model! Just something to think about... Regards,

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