January 31, 2011 / 9:12 PM / 8 years ago

UPDATE 2-Cavium Q4 profit tops view; to buy Chinese co

* Q4 adj EPS $0.29 vs est $0.27

* Q4 rev up 86 pct

* Says to buy China-based Celestial Semiconductor (Recasts, adds details, analyst comments)

By Supantha Mukherjee

BANGALORE, Jan 31 (Reuters) - Chipmaker Cavium Networks Inc CAVM.O posted better-than-expected fourth-quarter profit, helped by new design wins at its chip and software business, and said it agreed to buy a Chinese company to expand its media application offerings.

The company, which makes processors for networking and communications equipment makers, agreed to buy privately held Celestial Semiconductor for $55 million. Celestial provides ARM-based system-on-a-chip processor solutions for media applications.

“The new acquisition will grow their presence in television along with wireless high-definition multimedia interface (HDMI) products,” Stifel Nicolaus analyst Kevin Cassidy told Reuters.

“It could open up new markets for them. They don’t have a lot of market share in TVs in general.”

The company, which competes with NetLogic Microsystems Inc NETL.O, earned $34.6 million, or 70 cents a share, compared with a loss of $4.5 million, or 11 cents a share, last year.

Excluding items, the company, whose customers include Cisco Systems Inc (CSCO.O), Juniper Networks Inc (JNPR.N) and Alcatel Lucent ALUA.PA, earned 29 cents a share.

Fourth-quarter revenue rose 86 percent to $59.8 million.

Analysts expected earnings of 27 cents a share, excluding items, on revenue of $59.1 million, according to Thomson Reuters I/B/E/S.

The company’s consumer broadband segment is driving growth and it may also be seeing growth in the Chinese 3G market through its customers Huawei Technologies [HWT.UL] and ZTE (000063.SZ), analyst Cassidy said.

Shares of the Mountain View, California-based company closed at $39.54 on Monday on Nasdaq. The stock has gained a quarter of its value in the last three months. (Reporting by Supantha Mukherjee in Bangalore; Editing by Sriraj Kalluvila)

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