Wow.
Broadcom Corp.’s stock continues to take a beating.
The shares have fallen to around $28 in the past several days, breaking through the sort of $30 “floor” for the communications chipmaker.
The downdraft has slashed Broadcom’s market value to about $15 billion, down from about $25 billion earlier this year.
Broadcom got a bit of a break from its slide on Friday, when investors brushed off news that the company is restating results because of its probe into the timing of option grants.
The bigger freefall is more than just a headache for investors and employees with options. It has reversed local bragging rights.
No longer can Broadcom,or a technology company for that matter,claim to be the most valuable in Orange County.
That title now goes back to Allergan Inc., maker of what arguably is OC’s most well-known export: Botox.
At last check, Allergan’s lead over Broadcom was less than $1 billion.
By the time you read this, the companies could switch rankings.
The two have traded places as OC’s most valuable several times in the past few years, notably during the tech downturn.
Broadcom said it’s likely to delay its earnings report for the second quarter. But the results will be key.
Analysts expect adjusted earnings of $191 million in the quarter, up more than 50% from a year earlier. Estimates for revenue are $941.2 million, up 56%.
These aren’t exactly soft numbers. Hitting or even beating the estimates could be just what the stock needs.
Of course, part of Broadcom’s overall decline has to do with a pounding of “riskier” stocks these days.
Chip stocks, in particular, are hurting.
While Nasdaq is down nearly 10% in the past six months, the Philadelphia Semiconductor Sector Index is off about 20%.
Some stocks are just getting a bit too risky for today’s investors, who spend time worrying that either the economy is growing too fast or not fast enough.
The Wall Street Journal argued in a July 7 article that for the first time since 2002, many professional investors are re-evaluating where they put their money.
One example cited: In April, Susan Malley, president of Malley Associates Capital Management in New York, pulled back from the bets she had made on economic growth last year, including technology companies like Broadcom.
Jonathan Bernstein, a ETFZone.com trading specialist, asks why Broadcom and a few other tech stocks have fallen so fast, helping drag down the iShares Goldman Sachs Networking ETF by 5% in one five-day period (June 30 to July 7).
“The answer may be surprising,” he writes. “It turns out that most of the explanation for the sell-off in the networking sector is big picture: geopolitical tension, record high crude prices, a renewed threat of that ’70s scourge, stagflation. In sum, the bears (have) control of the market.”
Broadcom also has its issues with the stock options backdating controversy, which hasn’t helped its shares either. The company has come under scrutiny for the timing of option handouts.
Ta-Ta for Top Targus Chief
Roger Murphy is moving on from Targus Inc.
Murphy, who was spearheading big growth plans at the old Anaheim computer bag maker, resigned from the company earlier this month.
No other details were given for why he left Targus, which also makes computer accessories.
In his place is Eric Brenk, who is the interim chief executive. Brenk hails from the new owner of Targus, Fenway Partners Inc., which bought the company for $383 million late last year.
Murphy brought Targus a fresh energy, which he showed off during a company party in Las Vegas at the MGM Grand’s Tab & #250; Lounge.
He gave his work force and suppliers a pep talk and touted a new logo as the drinks flowed from the open bar.
He also came to Targus with an impressive resume.
Murphy worked for Gillette, now part of Cincinnati-based Procter & Gamble Co., before joining Targus. He headed Gillette’s operations in Britain.
The executive saw Targus as a company with international sales but lacking a true global model. Murphy sought to make Targus more like a big-time consumer products maker.
“Roger has tirelessly stewarded the business through a period of significant change,” said Howard Johnson, chairman of Targus, in a statement. “In particular, his strategic vision and efforts to create global branding will have a lasting impact on our business. We wish him well.”
Targus’ board has started a search for a long-term replacement.
Quest to Restate
Quest Software Inc. saw its stock fall further recently after saying it would restate some earnings in connection with options dating.
The Aliso Viejo-based company said it plans to restate results from 2000 through the first quarter of this year as part of its ongoing look at stock option grants.
A special board committee looking into Quest’s options found that stock compensation expenses should have been recorded for option grants and recognized over the vesting period of the options. The additional expense “will be significant,” Quest said.
In early June, Quest said it received an informal Securities and Exchange Commission inquiry about past stock option grants.
The company’s stock, already off by about 20% in the past three months, fell 10% after the news and hasn’t moved much since. The company got a couple of downgrades after the restatement news broke July 5.
