Irvine-based Broadcom Corp. got a nod from Joe Osha, the ubiquitous chip analyst for Merrill Lynch & Co.
Osha recently upgraded Broadcom and other chipmakers from “neutral” to “buy.”
Broadcom and other chipmakers posted strong earnings of late. But part of the upgrade was relative: Other chipmakers aren’t as attractive of investments, according to Osha.
“Semiconductor stocks overall continue to look range-bound to us, as first-quarter hopes of an accelerating recovery have evaporated,” Osha said in a research note. “The long-anticipated bottom is coming into view, to be sure, but the hoped-for rapid snapback remains elusive.”
The upgrade comes ahead of what’s sure to be a gut check for Broadcom investors. The chipmaker,along with every other public company,could have to report stock options as an expense later this year. (The timing still is being determined.)
It’s of particular importance for Broad-com since the company has made heavy use
of options to pay workers since its 1991 founding.
Under the old system, companies are allowed to account for the potential impact of stock options in the footnotes of their financial statements.
In early March, Broadcom said it would have had to expense about $677 million in stock options for 2004. That would have turned its $218.7 million profit into a loss of $383 million.
Additionally, earlier losses in 2003 and 2002 would have increased from $3.1 billion to $4.2 billion, the company said.
“There’s so much emotion around this issue that started with the Enron collapse,” said Bill Ruehle, Broadcom’s chief financial officer. “You have one side that says ‘options are evil’ and then the other side that says ‘if you make us expense it, the economy will collapse.'”
So Long Foster
The recent move by Kent Foster, chief executive of Santa Ana-based Ingram Micro Corp., to step back to just chairman puts things in perspective.
A year ago, Foster surprised many of Ingram’s customers and analysts when he fired longtime chief operating officer and presumed heir apparent Michael Grainger.
Grainger had overseen the company’s turnaround in 2003 and 2002. He said he was retiring, but industry insiders speculated the departure came because it wasn’t likely he would take over as Ingram chief executive.
Now Gregory Spierkel, an Ingram co-president, who was promoted the same day of Grainger’s exit, is set to succeed Foster in June. Keven Murai, Ingram’s other co-president, is set to become chief operating officer.
A Trimmer Newport
Chalk up another sale in the works for Newport Corp.
The Irvine-based maker of chip making gear said it planned to sell its robotic systems operations, which are based in the Bay area town of Richmond.
Products from New-port’s robotic systems division are used by chipmakers in the production of their offerings. The unit’s products include wafer-handling robots, load ports and equipment front-end modules.
Newport said it hired an investment bank to handle the sale. The robotic systems business includes “a number of issued and pending patents on state-of-the-art edge-gripping end effectors for wafer-handling robots.”
The unit is losing money. Newport said it expects the operation to post a loss of $2.5 million to $3.5 million when first-quarter results come out next week. The unit counts about $4 million in quarterly sales.
Newport has tried to turn around the unit, according to Robert “Bob” Deuster, the company’s chief executive. The moves have lessened operating losses but “will not eliminate them in the near term,” he said.
It’s another step in a massive shift for the company, which has been divesting businesses and cutting costs.
The robotics sale comes only six months after the company laid off 100 of its 2,100 workers. About three years ago, the company got rid of its measurement equipment business.
“Given our current strategic focus, we have decided to sell the robotic systems operations in order to improve our overall financial results and to allow us to serve the semiconductor equipment industry more profitably in the future,” Deuster said.
With the pending sale, Newport said its first-quarter sales would be slightly lower at $96 million to $97 million. Profits from continuing operations would be up, in the range of $3.9 million to $6 million.
“The robotic systems operations represented less than 5% of Newport’s total net sales and less than 17% of Newport’s sales to the semiconductor capital equipment market in the second half of 2004,” Deuster said.
