Broadcom Sticks With Wireless Chip Unit; Pulls 2020 Guidance; Stock Up
Broadcom withdrew 2020 financial guidance “until ... visibility returns to pre-COVID-19 levels,” said CEO Hock Tan on a fiscal Q1 call Thursday. Its Q4 release Dec. 12 predicted an 11% revenue increase for fiscal 2020 ending early November. Its Q1…
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ended Feb. 2. Tan said he hasn’t seen “a meaningful impact” on Broadcom semiconductor bookings from the coronavirus and thinks “the fundamentals of the business remain very much intact.” But there’s “no doubt COVID-19 has created a high level of uncertainty,” and that’s sure to hurt operations, especially in the year’s second half, he said. The stock closed up 7.1% Friday at $234.22. As consumer spending declines from the coronavirus, “the confidence level among businesses, enterprises might erode,” said Tan. That would “delay or push out spending by enterprises,” but that’s “all speculation,” he said. “We're trying to understand the impact of COVID-19 on our ecosystem,” but it’s at “a very early stage in the whole process,” he said. Broadcom, which put its wireless chip business up for sale last year, now has no interest in getting rid of it, said Tan. “Continuing to invest in and operate our wireless assets will create the most value.” Recent chip-supply agreements position Broadcom as “more closely and strategically aligned with our largest smartphone customer,” said Tan. The customer is known to be Apple. The agreements are for three-year terms, he said. They require Broadcom to “provide technology and road map alignment” in RF components for the “next three generations of 5G phones,” he said.