7/19/2002 - Broadcom Corporation (Nasdaq: BRCM), the leading provider of integrated circuits enabling broadband communications, today reported financial results for the second fiscal quarter ended June 30, 2002.
Net revenue for the second quarter of 2002 was $258.2 million, an increase of 8.1% over the $238.8 million reported for the first quarter of 2002 and an increase of 22.4% from the $210.9 million reported for the second quarter of 2001. Pro forma net loss for the second quarter of 2002 was $16.8 million, or $.06 per share (basic and diluted). This compares with pro forma net loss of $21.9 million, or $.08 per share (basic and diluted), for the first quarter of 2002, and pro forma net loss of $41.1 million, or $.16 per share (basic and diluted), for the second quarter of 2001.
Broadcom reports net loss and basic and diluted loss per share in accordance with generally accepted accounting principles (GAAP) and additionally on a pro forma basis, which excludes the effects of certain acquisition-related expenses, payroll taxes on certain stock option exercises, certain non-recurring charges, such as goodwill impairment, restructuring costs and loss on strategic investments, non-operating gains, and related income tax effects. After including these charges, gains and effects, substantially all of which were non-cash, GAAP net loss for the second quarter of 2002 was $129.4 million, or $.49 per share (basic and diluted), compared with a net loss of $166.1 million, or $.63 per share (basic and diluted), for the first quarter of 2002, and a net loss of $436.4 million, or $1.73 per share (basic and diluted), for the second quarter of 2001. Broadcom uses pro forma reporting internally to evaluate its operating performance and believes this presentation provides its investors with additional insight into its underlying operating results. A reconciliation of the pro forma adjustments to GAAP appears in the financial statements portion of this release.
Both GAAP net loss per share and pro forma net loss per share for the second quarter of 2002 were based on 265.4 million weighted average shares outstanding (basic and diluted), compared to 262.0 million weighted average shares outstanding (basic and diluted) in the first quarter of 2002 and 252.4 million weighted average shares outstanding (basic and diluted) in the second quarter of 2001.
Net revenue for the six months ended June 30, 2002 was $497.0 million, a decrease of 4.7% over the $521.4 million reported in the six months ended June 30, 2001. Pro forma net loss for the six months ended June 30, 2002 was $38.7 million, or $.15 per share (basic and diluted). This compares with pro forma net loss of $23.0 million, or $.09 per share (basic and diluted), for the six months ended June 30, 2001. After including the charges, gains and effects excluded in pro forma reporting, substantially all of which were non-cash, GAAP net loss for the six months ended June 30, 2002 was $295.5 million, or $1.12 per share (basic and diluted), compared with a net loss of $793.2 million, or $3.16 per share (basic and diluted), in the six months ended June 30, 2001. Both GAAP and pro forma net loss per share for the six months ended June 30, 2002 were based on 263.7 million weighted average shares outstanding (basic and diluted), compared to 251.0 million weighted average shares outstanding (basic and diluted) in the six months ended June 30, 2001.
In accordance with GAAP, losses in the 2001 periods include charges for the amortization of goodwill and certain intangible assets. Beginning with the first quarter of 2002, goodwill and intangible assets that are deemed to have indefinite lives are no longer amortized under GAAP but are subject to annual impairment tests under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. Had this standard been in effect for the 2001 periods, the net loss for the second quarter of 2001 would have been $229.5 million, or $.91 per share (basic and diluted), and the net loss for the six months ended June 30, 2001 would have been $385.5 million, or $1.54 per share (basic and diluted).
"Broadcom has continued to deliver strong quarterly results, even in this challenging environment. Revenue has shown improvement and pro forma loss per share has decreased for the fourth straight quarter," said Dr. Henry T. Nicholas III, Broadcom's President and CEO. "Our strong performance this quarter was led by our networking and cable modem product lines, as well as initial contributions from our emerging businesses. With the Mobilink Telecom acquisition that closed this quarter, we are aggressively pursuing opportunities in the cellular handset market and are excited about additional wireless opportunities across many of our markets."
Following is a review of selected key accomplishments and progress during the second quarter in the principal markets served by Broadcom:
In addition to closing the acquisition of Mobilink Telecom, Inc., Broadcom made significant advances in its wireless initiatives, specifically in the markets for Wireless LAN and Bluetooth™ applications. In the Wireless LAN marketplace, Broadcom secured new design wins with the industry's first direct-conversion, all-CMOS two-chip solution for the IEEE 802.11b wireless networking standard. Earlier this week, Broadcom announced the industry's first dual-band silicon solution for simultaneous IEEE 802.11a and IEEE 802.11b access. In the markets for Bluetooth applications, Broadcom continued to secure new design wins for its products.
During the quarter, Broadcom built upon its leadership position in the enterprise networking market with new Gigabit Ethernet products for both the client and switching markets. Most notably on the client side, Broadcom announced that Compaq is using Broadcom's NetXtreme™ Gigabit Ethernet Controllers as the Gigabit upgrade option for Compaq® Evo™ workstation and desktop computers. This solution allows Compaq to offer a Gigabit Ethernet connection for the same price as Fast Ethernet. In addition, Broadcom's Altima subsidiary announced its next generation Gigabit Ethernet controllers targeted at small to medium-size businesses.
For the switching market, Broadcom announced the availability of the StrataXGS™ chip family, the industry's first complete multi-layer (Layer 2 through Layer 7) scalable Gigabit Ethernet switch architecture optimized for enterprise business networks. This third generation Gigabit Ethernet switch architecture achieves the highest level of system integration in the industry and enables a new class of stackable Gigabit Ethernet switches at significantly lower costs than previously available. In addition, Broadcom and Radlan announced the availability of the Radlan Open and Portable Embedded Networking Software (OpENS™) for the StrataXGS Gigabit Ethernet switch architecture. Broadcom also introduced the ROBOSwitch 2G family of switches that are the first to provide eight ports of Fast Ethernet and two ports of Gigabit Ethernet connectivity on a single-chip for the small to medium-size business market.
In the server solutions market, the company's ServerWorks subsidiary announced two noteworthy product developments. ServerWorks announced its new Grand Champion™ SL product which extends the features of its Grand Champion SystemI/O™ family to entry-level pedestal, blade and rack-mounted servers. In addition, ServerWorks announced a new South Bridge chip that not only enables smaller, less costly Intel-based server appliances, supporting Microsoft's Server Appliance Kit (SAK) 2.0, but also enhances the entire Grand Champion family by adding greater connectivity to storage and higher PCI bandwidth.
During the second quarter, Broadcom launched three major new products in the digital cable and satellite set-top box markets, continuing to lead the industry in performance and integration. First, Broadcom announced its next generation single-chip cable TV set-top box solution which incorporates many features previously available only in high-end devices. This chip includes personal video recording (PVR) functionality, a high performance MIPS® processor, an advanced graphics engine and significant mixed signal integration for lower system solution cost. In addition, Broadcom introduced a more advanced version of this chip that supports cable modem and dual channel functionality in a single-chip, allowing cable operators to offer an expanded feature set with considerable savings over multi-chip solutions.
Broadcom continued to show progress in its newly addressed satellite set-top market by introducing a single chip decoder that includes PVR functionality, a high performance MIPS processor, an advanced graphics engine, and significant mixed signal integration for lower system solution cost. The chip also integrates multiple new security features to defeat the growing problem of satellite television piracy. In the emerging area of personal video recorders, Broadcom also announced that it was selected by TiVo to provide chips for TiVo's next generation Series2 video recorder.
In the cable modem market, Broadcom announced that advanced cable modem residential gateways using Broadcom chips and software received DOCSISTM certification from CableLabs® in the second quarter. These are the first cable modem gateways to combine a 4-port 10/100 Ethernet router/firewall, 32 Megabit per second (Mbps) HomePNA™ 2.0 home phone line networking, and an 802.11b wireless access point into a single, easy to use and manage product, enabling a significant increase in Broadcom silicon content in a cable modem. Broadcom also announced that ADC, Arris, Scientific-Atlanta, Tellabs and Thomson adopted Broadcom's proprietary PropaneTM high-performance upstream packet acceleration technology, which triples upstream capacity of broadband cable networks.
In the DSL market, Broadcom continued to make significant progress by making available production quantities of its DSL central office solutions which offer the lowest power and lowest bill of materials cost in the industry. In addition, Broadcom continued to expand its DSL product line by introducing the most integrated customer premises router. Broadcom's single-chip ADSL router is the first to integrate the digital transceiver with the analog front end, which enables lower costs and faster time to market for ADSL routers.
In the security market, Broadcom announced its new Multi-Gigabit security processor chip that enables the world's fastest SSL/TLS record processing systems. This chip combined with Broadcom's software, provides manufacturers with a high-performance record layer protocol processing solution for securing confidential e-Commerce transactions and data transfers over the Internet.
During the quarter, Broadcom commenced production of its SiByte™ multiprocessor serving the broadband processor market. Broadcom also announced it was sampling the SiByte single-core processor for high volume, cost-sensitive applications.
In the wide area networking market, Broadcom announced several new developments, including a breakthrough chip technology that enables 10-Gigabit per second (Gbps) serial transmission over a variety of copper media, thereby alleviating bottlenecks and reducing the size, power and cost of moving large amounts of data in high-speed switching and routing systems. The new technology also enables a new class of 10-Gigabit serial modules that are both much smaller and application independent.
The company also developed a new platform that enables the interoperability testing of 10-Gigabit Ethernet Xenpak-compliant optical modules and should facilitate more rapid deployment of next generation modules. Additionally, Broadcom introduced the first multi-protocol Dense Wave Division Multiplexing (DWDM) transport processor supporting both 10-Gigabit Ethernet and SONET/SDH applications. This processor reduces costs of transporting different types of traffic across metro networks and consumes significantly less power than prior solutions. Also, Broadcom announced a highly-integrated carrier-class switch fabric chipset with Terabit scalability that enables equipment vendors to build a range of systems that are able to guarantee and dynamically change bandwidth requirements on a per subscriber basis, supporting voice, video and data traffic.
"In summary, we are pleased with a quarter in which our financials continued to show steady improvement, we introduced an impressive range and number of leading edge products, we continued to pick up momentum in design wins, and we began to see market share gains in our emerging markets," Nicholas said. "We believe that our performance this quarter demonstrates Broadcom is solidly positioned to continue to take advantage of current and future opportunities in the broadband marketplace."
Broadcom will conduct a conference call with analysts and investors to discuss its second quarter 2002 financial results and current financial prospects today at 4:45 p.m. Eastern Time (1:45 p.m. Pacific Time). The company will broadcast the conference over the Internet. To listen to the call, please visit the Investor Information section of the Broadcom Website at www.broadcom.com/investor. The Webcast will be recorded and available for replay until 5:00 p.m. Pacific Time, July 25, 2002.
Broadcom Corporation is the leading provider of highly integrated silicon solutions that enable broadband communications and networking of voice, video and data services. Using proprietary technologies and advanced design methodologies, Broadcom designs, develops and supplies complete system-on-a-chip solutions and related hardware and software applications for every major broadband communications market. Our diverse product portfolio includes solutions for digital and satellite cable set-top boxes; cable and DSL modems and residential gateways; high-speed transmission and switching for local, metropolitan and wide area networking; home and wireless networking; cellular and terrestrial wireless communications; Voice over Internet Protocol (VoIP) gateway and telephony systems; broadband network processors; and SystemI/O™ server solutions. These technologies and products support our core mission: Connecting everything™.
Broadcom is headquartered in Irvine, Calif., and may be contacted at 1-949-450-8700 or at www.broadcom.com
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
All statements made or incorporated by reference in this release and in the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs, and certain assumptions made by us. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "potential," "continue," similar expressions, and variations or negatives of these words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the information available to us at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors.
Important factors that may cause such a difference for Broadcom include, but are not limited to, general economic and political conditions and specific conditions in the markets we address, including the continuing significant economic slowdown and volatility in the technology sector and semiconductor industry; trends in the broadband communications markets in various geographic regions; possible disruption in commercial activities related to terrorist activity or armed conflict in the United States and other locations; our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a timely manner; the rate at which our present and future customers and end-users adopt Broadcom's technologies and products in our target markets; delays in the adoption and acceptance of industry standards in the foregoing markets; the effects of new and emerging technologies; competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products; the timing of customer-industry qualification and certification of our products and the risks of non-qualification or non-certification; fluctuations in the manufacturing yields of our third party semiconductor foundries and other problems or delays in the fabrication, assembly, testing or delivery of our products; intellectual property disputes and customer indemnification claims and other types of litigation risk; the risks of producing products with new suppliers and at new fabrication and assembly facilities; problems or delays that we may face in shifting our products to smaller geometry process technologies and in achieving higher levels of design integration; the availability and pricing of third party semiconductor foundry and assembly capacity and raw materials; the quality of our products and any remediation costs; the timing, rescheduling or cancellation of significant customer orders and the ability of our customers to manage their inventories; the loss of a key customer; the effectiveness of our expense and product cost control and reduction efforts; changes in our product or customer mix; the volume of our product sales and pricing concessions on volume sales; our ability to retain and hire key executives, technical personnel and other employees in the numbers, with the capabilities, and at the compensation levels needed to implement our business and product plans; the risks inherent in our acquisitions of technologies and businesses, including the successful completion of technology and product development through volume production, integration issues and costs, related accounting charges, and contractual, intellectual property and other issues; the effects of natural disasters, international conflicts and other events beyond our control; and other factors.
Broadcom's Annual Report on Form 10-K, subsequent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.
Broadcom®, the pulse logo®, Connecting everything™, Grand Champion™, Mobilink™, NetXtreme™, Propane™, ServerWorks™, SiByte™, StrataXGS™ and SystemI/O™ are trademarks of Broadcom Corporation and/or its affiliates in the United States and certain other countries. Bluetooth™ is a trademark owned by Telefonaktiebolaget LM Ericsson AB and licensed to participants in the Bluetooth Special Interest Group (SIG) in the United States and certain other countries. Compaq® and Evo™ are trademarks of Compaq Information Technologies Group, L.P. OpENS™ is a trademark of Radlan, Inc. MIPS® is a registered trademark of MIPS Technologies, Inc. HomePNA™ is a trademark of the Home Phoneline Networking Alliance. DOCSIS™ is a trademark of Cable Television Laboratories, Inc. All other trademarks mentioned are the property of their respective owners.
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