Avago shares jump on strong chip sales outlook
Aug 24 (Reuters) - Shares of Avago Technologies Ltd (AVGO.O) rose more than 14 percent on Wednesday, a day after the analog chipmaker bucked the trend with a strong third quarter and forecast robust sales to smartphone customers boosting revenue growth.
The semiconductor industry is facing a slowdown as PC sales drop, supply chain problems related to the earthquake in Japan linger and the weak macro environment weigh on tech spending.
Avago, however, said it expects to sell more chips as its large OEM customers ramp up new designs of next-generation smartphones.
Analysts expect chip sales to jump between October-January as Apple Inc (AAPL.O) and Samsung Electronics Co (005930.KS) launch new smartphones.
"While macro concerns remain a headwind for all semis, company specific drivers at Aavgo should offset broader economic issues," Credit Suisse said in a research note to clients.
The brokerage raised its price target on the stock to $38 from $36 and maintained its "outperform" rating.
Avago, which competes with Analog Devices Inc ADI.N, RF Micro Devices Inc (RFMD.O) and Finisar Corp (FNSR.O), expects fourth-quarter revenue of $615-$633 million. [ID:nL4E7JN4CE]
"Wireless is well positioned to ramp in October/January with the upcoming iPhone and multiple 4G smartphone launches," Citigroup said, and added the company to its "top picks" list.
The brokerage added that Avago's industrial unit will also remain intact as it has significant exposure to Asia, which is not hurting as much as North America.
Avago expects its industrial business, which accounts for a third of total revenue, to be roughly flat sequentially in the fourth quarter on continued inventory adjustments among its component distributors.
Last week, rival Analog Devices said it expects its fourth-quarter revenue to be hurt by lower customer spending. [ID:nL3E7JG3NL]
Shares of the company, which counts IBM (IBM.N) and Cisco Systems Inc (CSCO.O) among its customers, were up 9 percent at $31.98 in later morning trade. They had earlier touched $33.46, making it one of the biggest gainers on Nasdaq.
(Reporting by Rachana Khanzode and Sayantani Ghosh in Bangalore; Editing by Sriraj Kalluvila)
((rachana.khanzode@thomsonreuters.com; Within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: rachana.khanzode.thomsonreuters.com@reuters.net)) Keywords: AVAGO/
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