Shares of Irvine’s Broadcom Corp. fell 17% Wednesday after several analysts cut their ratings on the stock over concerns about falling profits.
Analysts at Deutsche Securities, Wachovia and American Technology Research downgraded Broadcom after the chipmaker reported a big drop in third-quarter profits and was cautious about the fourth quarter.
Wachovia cited higher research and development costs for its downgrade. Broadcom’s research and development costs are “excessive,” it said, at around 37% of the company’s revenue.
On Tuesday, Broadcom reported a third-quarter profit of $165 million, down 14% from a year earlier but in line with analysts’ expectations.
The profit figure excluded stock compensation, charges from acquisitions and other costs.
Based on standard accounting practices that include those charges, profits were about $28 million, down about 75% from a year earlier.
The company also said it expected narrower profits in the current quarter.
The company said it expects “sequential growth” in revenue in the fourth quarter, with sales of $960 million to $990 million.
Third-quarter revenue was $950 million, up about 5% from a year ago and ahead of analysts’ expectation of $930 million.
