The Botox baron, Irvine’s Allergan Inc., no longer is the most valuable public company in Orange County.
The title went back to Irvine-based Broadcom Corp. in late October, when the value of the county’s biggest chipmaker on Wall Street surpassed $23 billion.
Allergan had a recent market value of $21 billion.
Allergan and Broadcom have been neck-and-neck for most of this year, with shares of both following similar trends in the first three quarters.
They diverged in November.
Broadcom has seen a 30% rise in the past two months on a bullish outlook for the current quarter. Shares are up 55% for the past 12 months.
The company said it expects fourth-quarter revenue of $1.8 billion to $1.9 billion, up some 38% from an earlier forecast.
Broadcom didn’t give a quarterly profit outlook.
Analysts, on average, are looking for adjusted profits of $379 million, a gain of about 50% from a year earlier.
Allergan’s shares have been trading sideways for the past two months on a more cautious fourth-quarter outlook that was in line with Wall Street’s expectations.
The two companies have swapped places in terms of market value several times in the past decade, notably during the tech downturn.
Broadcom started in 1991 making chips that go into television set-top boxes. It now makes chips for a wide variety of devices, including computers, cell phones, TVs and other consumer electronics that have seen upturns in sales recently.
“Valuation-wise, it’s a chip company so it will trade higher and fall lower than others,” said Adam Benjamin, an analyst at Jefferies & Co. in New York. “Semis have historically traded at bigger multiples.”
Broadcom has had a remarkably good year for a fairly mature chip stock even considering the swings of the tech sector.
The company’s shares have nearly tripled overall gains for the tech-heavy Nasdaq index, which is up nearly 20% in the past 12 months. They’ve also surpassed the Philadelphia Semiconductor Index—made up of 18 chip stocks, including Broadcom—which saw a 20% gain in the past year.
Broadcom competes with Texas Instruments Inc., Intel Corp., Qualcomm Inc. and other big names in the chip sector.
“It’s one of the very few large-cap semi names that can claim double-digit growth at this level,” Benjamin said. “From a market cap perspective they were one of the best performing semi stocks of 2010. It’s been a big outperformer.”
Allergan got its start in 1950 with allergy eye drops and has become widely known for its blockbuster wrinkle remover Botox. The company also makes eye and skin drugs and products for filling in lower-face wrinkles, lengthening eyelashes, enlarging breasts and treating obesity.
Shares of Allergan tend to see fewer swings in either direction compared to tech stocks. Healthcare stocks in general are seen as safe havens during a downturn—a rule of thumb that came to bear at the end of 2008, a punishing year on Wall Street by all measures.
Allergan closed the year up 1% overall at a $12 billion market value.
The company’s shares are up 16% in the past 12 months.
Allergan said in September that it would pay $600 million to settle a government probe of its marketing practices for flagship drug Botox.
New Botox Uses
The recent settlement cleared the way for seeking approvals for additional uses of Botox. Federal regulators followed the settlement with an approval of Botox in the U.S. for some patients with migraine headaches, which could add $1 billion in sales within five years.
Broadcom has focused on acquisitions in recent months. It typically picks up a company or two each quarter.
A few weeks ago, Broadcom announced plans to buy Redwood City’s Gigle Networks Inc., a maker of powerline networking chips, for up to $83 million.
Last month, it wrapped up its buy of Santa Clara’s Beceem Communications Inc., a maker of chips for the next generation of mobile phones, for $316 million. That came a few weeks after it bought Israel’s Percello Ltd. for up to $98 million in cash.
Percello makes chips, known as “femtocells” that help extend cellular coverage indoors where signals are weak.
In July, Broadcom paid $47.5 million for Britain’s Innovision Research & Technology PLC, which makes chips that allow for what is known as near field communication, or the wireless exchange of data within a matter of inches.
The last time Broadcom surpassed the $20 billion market value mark was in early 2006. At that time, Allergan trailed it at $15 billion.
Before 2006, the last time Broadcom saw $20 billion was when its shares were on a downward spiral after 2001’s crash of the technology sector.
Broadcom still is far from its peak.
In late 2000, the chipmaker was valued at $60 billion, the highest for any OC company.
In late 2002, the company hit a market value low of $2.7 billion.
Broadcom and Allergan have a common thread—Chief Financial Officer Eric Brandt.
Brandt was recruited to Broadcom in 2007, arriving from duties as chief executive of Aliso Viejo-based Avanir Pharmaceuticals.
Earlier in his career, he was financial chief for Allergan, earning two nods as one of the “Best CFOs in America” by Institutional Investor magazine.
Brandt holds an undergraduate degree in chemical engineering from the Massachusetts Institute of Technology and a business master’s from Harvard Business School.
