Wednesday October 17, 10:04 pm Eastern Time
Broadcom posts Q3 loss, revenues stabilize
IRVINE, Calif., Oct 17 (Reuters) - Communications chip maker Broadcom Corp. (NasdaqNM:BRCM - news) on Wednesday reported a third-quarter loss before charges that was slightly narrower than expected as revenue stabilized and margins improved after the recent slump in sales of chips for networking equipment and servers.
Broadcom, which makes communications chips for cable modems and other networking equipment, projected revenues would rebound by up to 5 percent in the current quarter, bringing sales to near $225 million.
Shares in Broadcom, which closed down 12 percent at $28.07 on Nasdaq on Wednesday, rallied to regain a portion of that loss in after-hours trade, reaching $29 on the Instinet system.
On a conference call with analysts, Broadcom executives held back from providing any guidance for 2002, citing the economic uncertainties that have after the Sept. 11 attacks on New York and Washington.
Even so, some analysts were ready to cautiously call a bottom for the company, which had seen sales and its share price plunge with the downturn in spending on communications gear.
``We believe the worst of the downturn is behind and Broadcom is well-positioned to experience strong growth when the upturn starts,'' said WR Hambrecht analyst Jim Liang in a research note.
Including a massive $1.18 billion write down on the value of acquisitions, Broadcom reported a loss of $1.6 billion, or $6.36 per share, compared with a net loss of $14 million, or 6 cents per share, in the year-earlier period.
The net loss also reflected a $16 million restructuring charge, including a cash payment of $13 million related to severance for laid off workers and the closure of some facilities. Broadcom continued to hire and ended the quarter with about the same work force as it had when the quarter began, executives said.
Revenues were $214 million, up from $211 million in the prior quarter but still down sharply from the $319 million recorded in the third quarter of 2000.
Excluding the charges, Broadcom posted a loss of $34 million, or 13 cents per share, compared with a profit of $79 million, or 30 cents per share in the year-earlier period. The company forecast that the pro forma loss per share would be about 12 cents in the current quarter.
The average estimate of 20 brokers polled by Thomson Financial/First Call had been for a pro forma loss of 15 cents, with a range of a loss of 14 cents to 18 cents for the September-ending quarter.
Gross margins for the company, rose to 47.1 percent from 46 percent in the prior quarter.
The quarter was in line with Broadcom's dramatically reduced expectations from June, Chief Financial Officer William Ruehle told Reuters.
``Turning the quarter is a little dramatic, but there was some stability,'' Ruehle said. ``Our revenues were right in line.''
Despite the massive write-down on acquisitions that it took in the quarter, Broadcom ended the quarter with $653 million in cash, down from $665 million in the previous quarter, Ruehle said.
A large part of the improvement in margins resulted from better production efficiencies in Broadcom's StrataSwitch, network products, which control data flows at high speed on corporate networks.
Two of the Broadcom's major customers in the quarter were Motorola Inc. (NYSE:MOT - news), which accounted for almost 22 percent of revenue up from 14 percent in the prior quarter, and Compaq Computer Corp (NYSE:CPQ - news), which accounted for just over 10 percent of revenue for the first time, the company said.
Broadcom shares have rallied since early October but is still off some 67 percent this year, underperforming the benchmark Philadelphia Stock Exchange Semiconductor index which is down about 26 percent.
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Texas Instruments Beats Estimates, but Orders Still Lagging
By Tish Williams
Updated from 6:32 p.m. EDT
Texas Instruments (TXN:Nasdaq - news - commentary - research - analysis) reported that its precipitous fall slowed in its third quarter, as orders and revenues still turned down, but at an eased pace.
Texas Instruments mustered $1.85 billion in revenue, edging out Street estimates of $1.78 billion in the third quarter. With a 3 cents-a-share shortfall, the company narrowly beat analyst expectations of a 4 cents-a-share loss, as gathered by Multex.com. Last quarter the chipmaker turned in a 3 cents-a-share profit with revenues of $2.04 billion. Wednesday's reported results paled in comparison to the third quarter of 2000's 33 cents-a-share profit and $3.15 billion revenue.
CFO Bill Aylesworth said the words investors had been hoping to hear about the third quarter -- but applied it to the fourth: Semiconductor revenues are expected to bottom out in the December quarter. For the fourth quarter, seasonally weak for TI, the communications chipmaker forecast a 10% revenue drop and a widened loss of 9 cents a share.
Texas Instruments was down 5% to $29.91 in Wednesday trading.
In the third quarter, the company's revenues were down 9% sequentially, as orders also slipped another 4% from the depressed second quarter. In the second quarter, revenues slipped 19% sequentially.
Aylesworth pointed to wireless as a "primary growth driver" as wireless revenues grew 16% sequentially in the quarter; overall, DSPs grew 10% in the quarter as other segments declined. Texas Instruments saw a pickup in orders for current-generation TDMA phones for the North American market. "We think that is a direct reflection of the realization of how much people value a cell phone in the very difficult times we're in," Aylesworth told TheStreet.com. He reported that the GSM market in Asia, particularly China, was also a strong area for TI's mobile-phone technology.
The company's operating margin moved in the wrong direction, going from a slim .5% margin in the second quarter to a negative margin of 8.5% in the third quarter. TI expects that to head south another 9%, as revenues decline, utilization rates of its fabs hover under 50% and TI works off inventory. The company whittled its inventory levels down from 72 days in Q2 to 58 days at the end of the third quarter. "We've been reducing our own inventories to reduce financial risk and because we didn't have customer demand," Aylesworth explained, adding that he expects the company's inventory level to bottom in the fourth quarter.
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Wednesday October 17, 9:00 pm Eastern Time
Siebel 3rd quarter earnings down 48 percent
By Lisa Baertlein
PALO ALTO, Calif., Oct 17 (Reuters) - Software maker Siebel Systems Inc. (NasdaqNM:SEBL - news) on Wednesday posted third-quarter earnings that were down 48 percent and at the low end of Wall Street's reduced expectations as key software license revenue tumbled.
``Since Sept. 11 we have faced an environment for information technology that has been as difficult as any in the history in the information technology industry,'' said Tom Siebel, founder and chief executive of the San Mateo, California-based company, which is the No. 1 vendor of customer service and sales software.
Siebel shares, which already had fallen 19 percent in regular Nasdaq trade, continued to slide after the results were announced. The stock settled near $16.44 in after-hours trade on Instinet, taking its full-day loss to nearly 28 percent.
In an interview with Reuters, Siebel said he expected business to pick up in the middle of next year as monetary and fiscal policies aimed at stimulating U.S. and European economies begin to have an impact.
During the company's conference call with analysts, Siebel said he was comfortable with analysts' published estimates of license revenue between $225 million to $300 million and earnings per share of 9 cents to 14 cents.
For 2002, he said the company was comfortable with license revenue estimates between $865 million and $1.4 billion, and continued operating margins of 20 percent.
REVENUE DECLINES FOR FIRST TIME
Siebel's total revenue fell to $428.5 million from $496.5 million in the third quarter of last year -- the first such year-over-year decline in the company's 8-year history.
License revenue, a closely watched measure of software company performance, came in at $193.5 million, versus $308.8 million a year ago to land well short of the company's originally forecast range of $250 million to $350 million.
Siebel slashed costs to turn in net income of $35.2 million, or 7 cents a share. That was down from $67.5 million, or 13 cents, in the year-earlier quarter ended Sept. 30.
Between the second and third quarters, the company said it cut expenses by $55 million and trimmed 200 jobs to bring its work force to 7,826 at Sept. 30.
Siebel, which makes a practice of cutting the bottom 5 percent of performers, said head counts could fall to around 7500 in the fourth quarter.
The company's results -- which do not exclude any of the special charges taken by many technology companies -- fell at the bottom end of analysts' forecasts for earnings of 5 cents to 14 cents and missed analysts' average estimate for earnings of 9 cents on revenue of $490.8 million, according to research firm Thomson Financial/First Call.
``Our earnings, there's no hocus-pocus, there's no pro forma, they're real,'' said Siebel.
Nevertheless, the Siebel results sent a chill through the analyst community, which had already been slashing software company forecasts due to weak corporate spending and the negative economic impact of the deadly Sept. 11 attacks on the Pentagon and World Trade Center.
``It's bad news for the sector,'' said Morgan Stanley analyst Chuck Phillips.
``It says that the demand environment is very, very poor,'' Banc of America Securities analyst Bob Austrian said. ``Estimates on the Street arguably have to come down further.''
COMPETITIVE FACTORS
Siebel is known as one of the best-run software companies in the industry. Its sales and marketing staff is considered first-rate and, until recently, the company had a virtual lock on the customer relationship management (CRM) market.
While the economy is partly to blame for Siebel's weaker third-quarter showing, analysts said there were other factors at play.
``The bad news is Siebel has more competition from SAP , Oracle (NasdaqNM:ORCL - news) and PeopleSoft (NasdaqNM:PSFT - news),'' said Robertson Stephens analyst Eric Upin.
Each of the company's new rivals is a big player in the business management software arena and is making a major push into the CRM giant's backyard.
``There is a very interesting cat fight there over who gets to be in second place,'' said Siebel, who added that he did not see anyone making gains against his company's mature, industry-specific product offerings that account for 76 percent of license revenue.
``I suspect whoever's in second place will end up with about 15 percent market share,'' Siebel said.
Meanwhile, Siebel's stock has lost more than 74 percent of its value since the start of the year, an even more bruising fall than the 53 percent decline over that period recorded by rival Oracle.
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Wednesday October 17, 5:28 pm Eastern Time
Extreme's CEO says overseas business growing
(UPDATE: updates with CEO comments, background throughout)
SANTA CLARA, Calif., Oct 17 (Reuters) - Extreme Networks Inc. (NasdaqNM:EXTR - news), a broadband network equipment maker, on Wednesday reported fiscal first-quarter financial results beating analysts' expectations, a result of keeping existing customers and gaining new ones, especially in Japan and China.
Shortly after the after-market hours announcement, Gordon Stitt, Extreme's chief executive, told Reuters that Korea also is a proving to be a growing market for the Santa Clara, Calif.-based manufacturer of Ethernet switches for networks.
Also, Europe in general, but especially Germany, is providing Extreme with solid business, Stitt said.
``As we look out six, twelve months, people are doing a lot more communicating, not less,'' Stitt said. ``Infrastructure is a critical part of the world economy.''
In the United States, Extreme's business remains stable, though the company did feel some pressure from the deadly Sept. 11 attacks, Stitt said, adding, however, ``We were able to effectively manage in the storm.''
Excluding one-time charges, Extreme said it broke even in its fiscal first quarter, compared with earnings of $9 million, or 8 cents per share, a year earlier and a loss of 1 cent per share that analysts polled by Thomson Financial/First Call on average expected.
Net revenues for the quarter ended Sept. 30 totaled $108.3 million compared with $119.3 million a year ago and the $107.4 million to $118 million range forecast by analysts.
Extreme shares on Wednesday fell $1.67, or 12 percent, to close at $12.20, marking a 109 percent gain from their all-time low of $5.85 on Sept. 27. As of Wednesday's closing price, Extreme shares were off 91 percent from their record high of $128.88 on Oct. 17, 2000.
Extreme said its actual net loss for its fiscal first quarter was $36 million, or 32 cents a share, including a $40.1 million charge, amortization of goodwill and intangible assets, and $14.7 million in deferred compensation.
That compares to net income in the same quarter last year of $4.5 million, or 4 cents per share.
Extreme in July forecast that for the fiscal year ending June 2002, its revenues would grow 10 to 11 percent to between $540 million to $545 million from $491 million in its most recent fiscal year.
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Wednesday October 17, 8:31 pm Eastern Time
Apple Hits Target but Wary on Future
By Peter Henderson
SAN FRANCISCO (Reuters) - Apple Computer Inc. (NasdaqNM:AAPL - news) said on Wednesday it had made its quarterly profit target despite slowing sales after the Sept 11 attacks, but it cut its current quarter earnings goal to nearly half what Wall Street had expected, fearing the holiday season would fall flat.
Apple's new retail stores would lose money in the current quarter rather than breaking even, and business as a whole was suffering since the attacks on the World Trade Center and the
Pentagon, Chief Financial Officer Fred Anderson said.
The company looked to offset some of that disappointment by promising what could be its first major hardware offering outside its flagship Macintosh computer line since the Newton handheld in 1993, but Anderson made no promises sales would jump.
``The consumer needs to show up for the holiday season for the personal computer industry to do well in the December quarter,'' Anderson said in a conference call. ``We are cautious.''
Cupertino, California-based Apple reported fourth-quarter operating earnings of $65 million, or 18 cents per share, down 40 percent from $108 million, or 30 cents per diluted share, in the year-earlier quarter.
Sales for the period ending in September dropped to $1.45 billion from $1.87 billion.
Apple, one of the few PC-makers that had not warned about its results in recent weeks, had targeted a slight increase from third-quarter earnings of 17 cents per share and sales of $1.475 billion.
Analysts polled by Thomson Financial/First Call had expected on average that Apple would report operating profit 16 cents per share on sales of $1.48 billion.
Anderson forecast December-quarter revenues of at least $1.4 billion and earnings per share of at least 10 cents. Wall Street's consensus had been 18 cents.
``You've got to give them credit for what is in the rear view mirror,'' said Mark Specker, an analyst at SoundView Technology, but he said the outlook was gloomy.
``I don't really see it as being Apple specific,'' he said, ''They are facing down the same market as, for example, Intel (Corp (NasdaqNM:INTC - news)) which didn't choose to be particularly optimistic on its December guidance either.''
Including investment gains, fourth quarter net profit fell to $66 million, or 19 cents per diluted share, from $170 million, or 47 cents per share in the year-ago quarter.
Apple shares rose to $17.18 in after hours trade from a close of $16.99 on Nasdaq, where they lost 6 percent for the day.
Apple is up about 14 percent this year, putting it in a select group of technology stocks that have risen in that period. But No. 1 PC-maker Dell Computer Corp (NasdaqNM:DELL - news) has gained 33 percent over the same period and at $16.99, its Nasdaq close on Wednesday, it is a fraction of its March 2000 high of more than $70.
WHAT'S THE BREAKTHROUGH?
Despite the consumer slowdown, Apple research and development is humming, Anderson said.
The company which introduced the mouse to the world on its 1984 Macintosh and rebuilt its reputation with products like its titanium-clad notebook, has tongues wagging again.
Apple teased loyal users that it would unveil a ''breakthrough digital device'' next week, setting off speculation among aficionados that a handheld device and digital music player was about to be unveiled.
``They are guiding down (the earnings target), but you have this 'gee, well what is the going to be' new product on Tuesday. That's the story,'' said Bear Stearns analyst Andy Neff.
Apple in an invitation to a launch said it had a new digital device. ``It's not a Mac,'' the company hinted.
Speculation centers on a handheld computer that could record and play music, which would work with or incorporate the popular iTunes jukebox software, although the company declined to comment.
Specker said Apple's innovation and $4.3 billion cash stockpile -- more than IBM's -- would buffer it during hard times.
``It has a small market share with a psycho following and they can charge a big premium for their product,'' he said.
TOUGH QUARTER
But Anderson said the new retail store chain would lose money in the current, first fiscal quarter and fiscal 2002.
``We now expect that the slowdown in retail that everyone's experienced since the attack of Sept. 11 will result in our reporting a small loss for our retail stores for the December quarter rather than the break-even results we had previously expected,'' Anderson told Reuters in a telephone interview.
Apple's quarter went out with a whimper, not the usual bang: sales in the first two months of the quarter looked good but fell sharply after the Sept. 11 attacks, executives said.
Apple was not alone, though. Analysts Gartner Inc and International Data Corp both said PC shipments fell by more than 10 percent in the third quarter from a year earlier.
``The U.S. market is still greatly depressed from year-ago levels and is likely to continue to remain weak for at least several more quarters,'' IDC analyst Roger Kay said. |
