Shares of Irvine chipmaker Broadcom Corp. shot up in afterhours trading Monday after the company reported adjusted profits for the June quarter that beat Wall Street expectations.
Investors sent shares up more than 9% in extended New York trading to a market value of $18.7 billion as they seized upon Broadcom’s better-than-expected gross margins and positive outlook for the current quarter.
Revenue for the June quarter hit $1.8 billion, up 12% from a year earlier and in line with analyst estimates.
Adjusted profits topped $418 million, flat from a year ago.
Analysts on average were expecting adjusted profits of about $386 million.
Gross margins, a key measure for investors in assessing technology companies, were 51.1%, about flat from a year ago.
The company said it expects revenue in the current quarter between $1.9 billion and $2 billion, which is on the high end of analyst expectations.
Wall Street’s highest estimate is $1.93 billion.
Analysts are looking for revenue on the low end of $1.83 billion.
Gross margins in the September quarter are projected to be flat or up slightly, according to Broadcom.
Research and development and general administrative expenses are projected to be flat to down some $10 million compared to the June quarter.
These costs accounted for about $130 million in the recently ended quarter for Broadcom, which makes chips for networking, computers and consumer electronics.
Its June quarter performance was bolstered by better-than-expected gross margins and record cash flow of nearly $1.8 billion, according to Chief Executive Scott McGregor.
“Looking forward, we see strong demand for our communications solutions, reinforcing that innovation is driving customer demand. We expect solid growth in revenue and profitability in Q3,” he said.
The current outlook seems to temporarily quell some lingering concerns over slowed sales of chips for smartphones to Nokia Oyj and Samsung Electronics Co. that dogged the company following its April earnings and subsequent guidance.
Broadcom, which counts Apple Inc. among its clients, may have been helped by the the Cupertino-base company's strong quarterly earnings report last week. Apple beat Wall Street estimates due to improved sales of its consumer gadgets, namely the iPad.
Broadcom’s mobile and wireless unit made up 43% of the company’s $6.8 billion in 2010 sales.
A good chunk of the unit’s revenue comes from Bluetooth, Wi-Fi and other chips used in computers, video game consoles and other devices.
The company could eventually come to rival San Diego-based Qualcomm Inc. in processor chips for mobile phones, according to analysts and company officials.