The company leads the market for chips that provide short-distance wireless connections, such as the ones used in iPhones and iPads, but demand is slowing for chips that connect mobile phones to the Internet. Bloomberg reported that the company is struggling to roll out new cellular technologies, hurting its ability to grab more orders in smartphones.
Broadcom is trimming its workforce to cut back on expenses, with a third of the layoffs coming among workers brought onboard with its acquisition of a Renesas Electronics business unit. In a statement, the company said it is forecasting fourth quarter sales will be about $1.98 billion, and revenue will be in the range of $1.92 billion to $2.03 billion. Analysts on average predicted $2.13 billion, according to data compiled by Bloomberg.
Some of the company’s 3G-chip customers are cutting back on inventory, and the company is facing “ferocious” price competition for that product, Chief Executive Officer Scott McGregor said on a conference call. Broadcom needs to field LTE modems to help it regain some connectivity business, Bloomberg reported. “Long-term, I believe this business is pretty vibrant,” said McGregor, who was asked whether Broadcom might consider giving up its efforts in cellular modems. “Near-term, we’ve got some headwinds,” he said.
Third-quarter net income jumped 44 percent to $316 million, or 55 cents a share, from $220 million, or 38 cents, the year before. Sales were little changed at $2.15 billion vs. $2.13 billion in the third quarter 2012. Broadcom shares fell 21 percent this year, compared with a 28 percent gain in the Philadelphia Semiconductor Index.