Wall Street is betting that Broadcom Corp. will ride out the downturn with minimal bumping and bruising.
The Irvine chipmaker has plenty of cash on hand, minimal debt and a solid footing in several key markets for chips, according to analysts.
The company “may actually emerge somewhat stronger as they take market share from possibly weaker players,” said Tim Luke, a Barclays Capital analyst in New York.
The optimism is playing out in Broadcom’s shares. They’re up about 15% this month on a recent market value of $8.5 billion, after dropping about 50% during the fall Wall Street meltdown.
The Philadelphia Stock Exchange’s Semiconductor Sector Index is up about 10% in December.
The company closed up 5% Tuesday amid a rally among chipmakers.
Broadcom itself is guarded.
A few weeks ago, the company lowered its sales outlook for the fourth quarter and said some of its customers have canceled orders.
Broadcom, which makes chips for consumer electronics, computers and networking gear, now is expecting fourth-quarter sales of $1.05 billion to $1.1 billion, down from its previous outlook of $1.17 billion to $1.2 billion.
The less-than-rosy forecast really didn’t faze analysts, who on average expect fourth-quarter profits of $194 million on sales of $1.19 billion.
“We think this preannouncement was widely expected among investors and is mostly embedded in the stock,” Craig Berger, an analyst with Friedman, Billings, Ramsey & Co. in New York, wrote in a research note.
Broadcom has a lot of things going for it these days, company watchers say.
For one, it’s got a nice mix of chips in consumer gadgets that still are in relatively high demand, including Blu-Ray DVD players, Apple Inc.’s iPhone and video game consoles such as Nintendo Co.’s Wii.
“They are very much in whatever it is consumers happen to have the ability to buy this holiday season,” said Cody Acree, an analyst at Stifel, Nicolaus & Co. in Dallas. “Broadcom still has chips in a huge swath of things you might find at Best Buy.”
For more on this story, read the Dec. 29 issue of the Business Journal.
