Shares of Irvine-based communications chipmaker Broadcom Corp. jumped Wednesday after the company gave an outlook fourth quarter that trumps Wall Street’s expectations.
Broadcom is edging its way closer to doing a $2 billion revenue quarter, which would be an all-time record for the company.
Investors sent shares up nearly 12% Wednesday on a market value of $21 billion.
On Tuesday, Broadcom said it’s expecting fourth-quarter revenue of $1.8 billion to $1.9 billion, up about 38% from a year earlier and topping the $1.75 billion in sales analysts had been expecting.
Broadcom didn’t give a profit outlook.
Analysts, on average, are looking for adjusted profits of $342 million, which would show a gain of about 40% from a year earlier.
“Looking ahead, we believe that consumer demand for connectivity will continue to drive demand for our communication semiconductors, which should enable Broadcom to deliver solid revenue growth and sustained profitability in the fourth quarter,” Chief Executive Scott McGregor said.
Broadcom’s chips go into computers, servers, cell phones and a variety of consumer electronics.
The rosy outlook comes on the heels of its third-quarter results, which beat analysts’ expectations.
Broadcom reported third-quarter sales of $1.81 billion, up 44% from a year earlier and beating analysts’ expectation of $1.75 billion in sales.
“We had an excellent quarter with record revenue,” said John Dryden, Broadcom’s head of investor relations.
Excluding charges for stock compensation, income tax, write-downs on assets and other one-time costs, the company posted $373 million in profits, up 86% and beating analysts’ expectation of $357 million in profits.
Broadcom also announced on Tuesday that it agreed to acquire Israel’s Percello Ltd. for up to $98 million in cash.
The boards of the two companies have approved the acquisition, which is set to close by the first quarter.
Percello makes chips, known as “femtocells” that help extend cellular coverage indoors where signals are weak, the company said.
“As wireless data usage continues to expand, this technology is well-positioned to enable wireless carriers to offload both data and voice traffic, while offering subscribers better cell reception in the home and office,” said Greg Fischer, general manager of Broadcom’s broadband carrier access unit.
Percello, which started in 2007, had raised some $20 million in venture funds from San Francisco-based Granite Ventures, Israel’s Vertex Venture Capital and T-Mobile Venture Fund, an investment arm of Germany’s Deutsche Telekom AG. An early investor was Ruth Wertheimer, the daughter of Israeli billionaire Stef Wertheimer.
The deal marks Broadcom’s second this month.
A few weeks ago it agreed to pay $316 million to buy a Santa Clara-based Beceem Communications Inc, a maker of chips for the next generation of mobile phones.
In a separate statement on Tuesday, Broadcom said it plans to raise roughly $600 million in a debt offering.
The company didn’t say the final amount and said it plans to use the funds for “general corporate purposes.”
Broadcom, which doesn’t have any long-term debt now, likely is taking advantage of record low interest rates for strong corporate borrowers.
The company ended the third quarter with $1.2 billion in cash and short-term assets.
