January 27, 1999 01:32
Broadcom earnings dazzle as cable demand grows
(Updates with comment from CEO, earnings detail)
By Scott Hillis
LOS ANGELES, Jan 26 (Reuters) - Communications circuit maker Broadcom Corp. on Tuesday reported sharply higher earnings that rose on the back of strong demand for cable television boxes that use its chips.
Broadcom's earnings report came hand-in-hand with the announcement of a two-for-one split of its stock -- one of the hottest technology issues around.
It also followed the Irvine, Calif.-based company's debut on Monday in the buyout game with a $100 million-acquisition of Maverick Networks, which makes integrated circuits for switching equipment.
Broadcom's net income for the fourth quarter rose to $12.8 million, or 26 cents per share on a diluted basis, from $2.5 million, or 6 cents a share, a year earlier.
Revenues for the quarter more than quadrupled to $70.1 million from the $17.3 million in the year earlier period.
"We had a great quarter," Broadcom Chief Executive Officer Henry Nicholas told Reuters in an interview. "We are seeing an increase in earnings across the board, principally in digital cable," Nicholas said.
The stock split will be effective Feb. 17, Broadcom said.
For the full year, net income was $36.4 million, or 78 cents a share, compared with a net loss of $1.2 million, or 4 cents a share, in 1997.
The company supplied more than 90 percent of the chips used in cable television set-top boxes, sales of which climbed to some 2 million units last year, Nicholas said.
"There is an unquenchable thirst for broadband connections into the home," he said.
Among other uses, that technology will enable people to surf the Internet and watch television at the same time.
Nicholas said buying Maverick and its advanced "layered" switching technology was crucial to extending multimedia service throughout an entire business network.
"That was the missing piece of the puzzle to provide this end-to-end technology," he said of the Maverick purchase.
While the acquisition would fill a gap in Broadcom's strategy, Nicholas pledged the company would boost spending on developing new products.
Research and development would amount to 19 percent to 21 percent of the company's revenues in the coming years, compared to 16 percent to 20 percent in the past, he said.
"We have always had a high emphasis on R and D," he said. Broadcom last year unveiled a series of new chips that integrate video, voice and data delivery and which analysts said heralded the dawn of truly interactive television. Those innovations have helped fuel a strong rise in Broadcom's stock, which has quintupled since it started trading in April 1997.
Broadcom stock powered ahead $9.25 on Tuesday to close at $129.50. The earnings were released after the close of trade
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