Broadcom seen inching up 4th-qtr forecast at analysts meeting

NEW YORK Wed Dec 5, 2012 3:44pm EST

NEW YORK Dec 5 (Reuters) - Broadcom Corp is likely to raise its revenue target for the fourth quarter on better-than-expected sales of chips used in mobile devices, according to analysts.

Strong consumer demand for Apple Inc's iPhone 5 and Samsung Electronics Co's latest Galaxy phones, which use Broadcom chips, is behind the announcement expected at the company's annual investor meeting on Thursday, analysts said in research notes and interviews.

While iPhone 5 sales were initially stunted by a supply shortage, Citi analyst Glen Yeung said in a Nov. 28 research note that "dramatically" improved availability is helping Broadcom.

On Oct. 23 Broadcom had forecast fourth-quarter revenue of $1.95 billion to $2.1 billion, implying a midpoint of $2.025 billion.

Wall Street sees the company beating the mid-point, with a consensus estimate of $2.04 billion, according to Thomson Reuters I/B/E/S.

But Citi's Yeung expects quarterly revenue of about $2.096 billion, up from his earlier estimate of $2.025 billion.

While this would still be within the original guidance range, an increase to the high end of its range would be good news in a chip market where most of the latest targets have been bleak.

Investors have been disappointed by weak guidance from bigger chip companies Intel Corp and Texas Instruments Inc. Another chip maker, Altera Corp, trimmed its fourth quarter revenue guidance on Tuesday.

Broadcom said in October that its forecast reflected challenging marketing conditions, including weakness in areas such as computer data center infrastructure and communications network equipment.

But, now, Canaccord Genuity analyst Bobby Burleson said he believes the company is having to boost its chip production levels due to stronger than expected demand.

"Specifically, we believe BRCM has increased orders to suppliers by over 5 percent for the remainder of Q4 and through Q1 versus our prior month's checks," Burleson said.

"I think consumer devices sold well after Thanksgiving," the analyst said, citing Samsung and Apple devices in particular.

Williams Financial analyst Cody Acree also cited improvements in infrastructure as well as phones.

"Leverage into the handset space and some of the infrastructure markets that are going better means they'll likely up their range a little bit," Acree said, adding that Broadcom may not come out with an "overly aggressive" increase because of economic uncertainties.

FBR Capital Markets analyst Craig Berger was more cautious in his expectations for the analyst day, but noted that Broadcom shares would likely rise if the company provides stronger guidance on Thursday as the shares have not been trading up much ahead of the meeting.

"We believe BRCM shares are setting up favorably ahead of its analyst day as expectations remain largely muted," he said.

"While we do not think the firm will raise revenue guidance, it could give favorable margin or operating expense spending commentary, or favorable product commentary," Berger added.

Broadcom shares fell 14 cents, or 0.5 percent, to $32.29 on Nasdaq late Wednesday afternoon. The stock has fallen from $33.36 just ahead of its Oct. 23 earnings report, when it first issued its current quarter guidance.

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