Shares of Irvine-based chipmaker Broadcom Corp. slumped Tuesday as investors looked past fourth-quarter results that topped expectations and an in-line forecast for the current quarter and seemed to seize instead upon a slip in profit margins.
Investors sent Broadcom’s shares down more than 5% in afterhours trading on a recent market value of $24 billion.
Broadcom’s quarterly results and the market’s reaction to them can be something of a guessing game.
Investors appear to have sold the stock with a slip in gross profit margin, according to a Bloomberg report.
The chipmaker’s fourth-quarter gross margin came in at 50.9%, below the 51.6% estimate of analysts on average.
Otherwise, Broadcom’s fourth-quarter results topped expectations.
Broadcom reported sales of $1.95 billion, up 45% from a year earlier and beating analysts’ expectations of $1.9 billion in sales.
Excluding stock compensation, income tax, write-downs on assets and other onetime charges, the company posted $384 million in profits, up 53% and beating the $379 million in profits expected by Wall Street.
“I am very pleased with our record performance in 2010, as Broadcom gained significant market share and delivered record revenue, earnings per share, and cash flow from operations,” Chief Executive Scott McGregor said.
Broadcom makes chips for computers, cell phones and consumer electronics.
For the current quarter, Broadcom offered a revenue outlook in line with expectations.
But that too could have spooked some investors who might have been looking for a more bullish projection.
The company projected first-quarter sales of $1.75 billion to $1.85 billion, in line with analysts’ expectations of $1.8 billion and up roughly 23% from a year earlier.
Broadcom didn’t give a profit outlook.
Analysts, on average, are expecting Broadcom to see adjusted profits of $333 million, up about 14% from a year earlier.
Broadcom also boosted its quarterly dividend payment to shareholders, going to $51 million from $45 million.
The company first declared a quarterly dividend a year ago.
Broadcom said it is set to spend $300 million buying back shares in an “accelerated share repurchase plan.”
“Broadcom’s strong growth and powerful operating cash flow drive our ability to increase the return of capital to our investors while fueling our business organically and through M&A,” McGregor said.
