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IRVINE, Calif., Jan 29, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Broadcom Corporation (Nasdaq: BRCM) today reported unaudited financial results for its fourth quarter and year ended December 31, 2008.
Net revenue for the fourth quarter of 2008 was $1.127 billion, a decrease of 13.2% compared with the $1.298 billion reported for the third quarter of 2008 and an increase of 9.7% compared with the $1.027 billion reported for the fourth quarter of 2007. Net loss computed in accordance with U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2008 was $159.2 million, or $.32 net loss per share (basic and diluted), compared with GAAP net income of $164.9 million, or $.31 per share (diluted), for the third quarter of 2008, and GAAP net income of $90.3 million, or $.16 per share (diluted), for the fourth quarter of 2007. The company's financial results for the fourth quarter of 2008 reflect impairment charges of goodwill and certain tangible assets of its mobile platforms business group, as well as in-process research and development charges associated with its acquisition of the digital TV business of Advanced Micro Devices, Inc. These charges represented cumulative reductions in net income of $0.40 per share (diluted), as discussed in greater detail below.
Net revenue for the year ended December 31, 2008 was $4.658 billion, an increase of 23.3% from the $3.776 billion reported for the year ended December 31, 2007. Net income computed in accordance with GAAP for the year ended December 31, 2008 was $214.8 million, or $.41 per share (diluted), compared with GAAP net income of $213.3 million, or $.37 per share (diluted), for the year ended December 31, 2007.
Net revenue for the year ended December 31, 2008 included royalties of $149.2 million received pursuant to a patent license agreement entered into in July 2007. The royalties received in the third and fourth quarters of 2008 and the fourth quarter of 2007 were $38.0 million, $40.0 million and $31.8 million, respectively. The company anticipates that it will receive $19.0 million in royalties under this patent license agreement in the first quarter of 2009.
In the fourth quarter of 2008, the company performed an annual review of its goodwill and long-lived assets to determine if any of these assets were impaired. As a result of this review, the company recorded an impairment charge of $169.4 million (which consisted of $149.7 million of goodwill and $19.7 million of property and equipment) in the quarter related to its mobile platforms business group. In addition, in connection with the company's acquisition of the digital TV business of AMD, the company recorded a charge for in-process research and development of $31.5 million in the fourth quarter of 2008. These charges represented cumulative reductions in net income of $0.40 per share (diluted) in the fourth quarter and year ended 2008. The charges will not result in any changes in strategy or direction for Broadcom's mobile platforms or digital TV businesses.
"Despite the dramatic impact that the economic downturn had on the semiconductor industry as a whole in 2008 and on our business in the fourth quarter, Broadcom achieved record revenue levels in 2008 increasing annual net revenue by approximately $900 million and generated approximately $920 million of cash flow from operations during the year," said Scott A. McGregor, Broadcom's President and Chief Executive Officer. "As we look into the first quarter of 2009, we believe the current economic slowdown will continue to negatively impact our business as demand continues to decrease and settle into new levels and channel inventory adjusts accordingly. As we noted at our Analyst Day in December, Broadcom's key goals for 2009 are to manage costs and focus on operating cash flow, while at the same time leveraging our research and investments to gain market share to ensure that we will emerge in a much stronger position once the economy recovers. Consistent with those goals, we have been reducing controllable ongoing expenses since the third quarter of 2008 and are implementing further cost saving measures this quarter, including a delay in salary increases, a reduction in our workforce and a variety of other belt tightening actions on discretionary spending."
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its fourth quarter and year 2008 financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The company will broadcast the conference call via webcast over the Internet. To listen to the webcast, or to view the financial or other statistical information required by Securities and Exchange Commission (SEC) Regulation G, please visit the Investors section of the Broadcom website at www.broadcom.com/investors. Please note that we have added additional information to this presentation regarding our revenue, gross margin and operating expenses. The webcast will be recorded and available for replay until 5:00 p.m. Pacific Time, Friday, March 27, 2009.
The financial results included in this release are unaudited. The audited financial statements of the company for the year ended December 31, 2008 will be included in Broadcom's Annual Report on Form 10-K, to be filed with the SEC in February 2009.
About Broadcom
Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications. Broadcom® products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. We provide the industry's broadest portfolio of state-of-the-art system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. These solutions support our core mission: Connecting everything®.
Broadcom is one of the world's largest fabless semiconductor companies, with 2007 revenue of $3.78 billion, holds over 3,100 U.S. and over 1,400 foreign patents, and has more than 7,600 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video, data and multimedia.
Broadcom is headquartered in Irvine, Calif., and has offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at +1.949.926.5000 or at www.broadcom.com.
Cautions regarding Forward-Looking Statements:
All statements included or incorporated by reference in this release and 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 business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to, guidance provided on future revenue, gross margin and operating expense targets for the first quarter of 2009, references to the planned filing date of our Annual Report on Form 10-K, and statements about our plans to implement further cost saving measures. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.
These risks and uncertainties include, but are not limited to:
general economic and political conditions and specific conditions in the markets we address, including the continuing volatility in the technology sector and semiconductor industry, current general economic volatility, trends in the broadband communications markets in various geographic regions, including seasonality in sales of consumer products into which our products are incorporated, and possible disruption in commercial activities related to terrorist activity or armed conflict;
the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;
our ability to adjust our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers;
the effectiveness of our expense and product cost control and reduction efforts;
our dependence on a few significant customers for a substantial portion of our revenue;
the gain or loss of a key customer, design win or order;
our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner;
risks and uncertainties resulting from Broadcom's equity award review, including pending and potential new claims and proceedings related to such matters, such as shareholder litigation and any action by the SEC, U.S. Attorney's Office or other governmental agency that has resulted in, and could result in further, civil or criminal sanctions against the company and/or certain of our current or former officers, directors or employees, or other actions taken or required as a result of the review, and the extent to which we are able to receive reimbursement of our expenses related to such litigation and actions through our directors' and officers' liability insurance carriers. In the event that the company's coverage under these policies is reduced or denied, our financial exposure would be increased;
the risks inherent in acquisitions of technologies and businesses, including the timing and successful completion of technology and product development through volume production, integration issues, potential contractual, intellectual property or employment issues, the risk that anticipated benefits of an acquisition may not be realized, and accounting treatment and charges;
intellectual property disputes and customer indemnification claims and other types of litigation risk;
our ability to retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels needed to implement our business and product plans;
the availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials;
the quality of our products and any potential remediation costs;
the rate at which our present and future customers and end-users adopt Broadcom's technologies and products in our target markets;
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;
changes in our product or customer mix;
the volume of our product sales and pricing concessions on volume sales;
our ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets;
the risks of producing products with new suppliers and at new fabrication and assembly and test 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;
delays in the adoption and acceptance of industry standards in our target markets;
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;
the risks and uncertainties associated with our international operations, particularly in light of terrorist activity, armed conflict or political unrest; and
the level of orders received that can be shipped in a fiscal quarter.
Our Annual Report on Form 10-K, subsequent 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. The forward-looking statements in this release and the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement, except as required by law.
Broadcom, the pulse logo, Connecting everything, and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners.
Broadcom Trade Press Contact
Bill Blanning
Vice President, Global Media Relations
949-926-5555
blanning@broadcom.com
Broadcom Investor Relations Contact
T. Peter Andrew
Vice President, Corporate Communications
949-926-5663
andrewtp@broadcom.com
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2008(a) 2007(b) 2008(a) 2007(b)
------- ------- ------- -------
Net revenue $1,126,509 $1,027,035 $4,658,125 $3,776,395
Cost of revenue 557,797 488,222 2,213,015 1,832,178
------- ------- --------- ---------
Gross profit 568,712 538,813 2,445,110 1,944,217
Operating expense:
Research and
development 382,666 363,285 1,497,668 1,348,508
Selling, general and
administrative 147,213 119,324 543,117 492,737
Amortization of
purchased intangible
assets 2,842 184 3,392 1,027
In-process research and
development 31,500 - 42,400 15,470
Impairment of goodwill
and long-lived assets 169,443 - 171,593 1,500
Settlement costs - - 15,810 -
Restructuring costs
(reversal) - - (1,000) -
- - ------- -
Income (loss) from
operations (164,952) 56,020 172,130 84,975
Interest income, net 7,218 29,714 52,201 131,069
Other income (expense),
net 971 5,849 (2,016) 3,412
--- ----- ------- -----
Income (loss) before
income taxes (156,763) 91,583 222,315 219,456
Provision for income
taxes 2,452 1,248 7,521 6,114
----- ----- ----- -----
Net income (loss) $(159,215) $90,335 $214,794 $213,342
========== ======= ======== ========
Net income (loss) per
share (basic) $(.32) $.17 $.42 $.39
======= ========= ===== =====
Net income (loss) per
share (diluted) $(.32) $.16 $.41 $.37
======= ========= ===== =====
Weighted average shares
(basic) 498,338 541,006 512,648 542,412
======= ======= ======= =======
Weighted average shares
(diluted) 498,338 572,289 524,208 577,682
======= ======= ======= =======
(a) Includes royalties in the amount of $40.0 million and $149.2
million in the three months and year ended December 31, 2008,
respectively, received pursuant to a patent license agreement
entered into in July 2007.
(b) Includes royalties in the amount of $31.8 million in the three
months and year ended December 31, 2007 received pursuant to a
patent license agreement entered into in July 2007.
The following table presents details of total stock-based compensation
expense included in each functional line item in the unaudited
condensed consolidated statements of operations above:
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Cost of revenue $6,643 $6,581 $24,997 $26,470
Research and development 95,975 89,767 358,018 353,649
Selling, general and
administrative 32,698 33,277 126,359 139,533
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended Years Ended
December 31, December 31,
2008 2007 2008 2007
Operating activities
Net income
(loss) $(159,215) $90,335 $214,794 $213,342
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating activities:
Depreciation
and amortization 22,466 18,325 78,236 64,082
Stock-based
compensation expense:
Stock options
and other
awards 55,353 74,935 224,244 324,261
Restricted stock
units issued by
Broadcom 79,963 54,690 285,130 195,391
Acquisition-related items:
Amortization of
purchased intangible
assets 6,895 4,118 19,249 14,512
In-process research
and development 31,500 - 42,400 15,470
Impairment of
goodwill and
long-lived
assets 169,443 - 171,593 1,500
Impairment of
strategic
investments and
marketable
securities - (2,960) 6,047 1,809
Changes in
operating assets
and liabilities:
Accounts
receivable 128,704 26,730 (3,294) 18,400
Inventory (20,881) (18,153) (112,173) (27,082)
Prepaid expenses
and other assets (9,644) (18,081) (11,273) (59,691)
Accounts
payable (146,716) (41,451) 616 13,698
Accrued settlement
liabilities - - (2,000) (2,000)
Other accrued and
long-term
liabilities (11,711) 20,825 6,046 51,625
Net cash provided
by operating
activities 146,157 209,313 919,615 825,317
Investing activities
Net purchases of
property and
equipment (17,657) (27,109) (82,808) (150,427)
Net cash paid
for acquisitions
and other purchased
intangible assets (140,746) - (170,541) (219,324)
Purchases of
strategic investments - - (355) (3,500)
Proceeds from
sales of
strategic investments - 3,506 - 3,812
Purchases of
marketable
securities (5,190) (95,720) (1,115,704) (667,384)
Proceeds from
sales and
maturities of
marketable
securities 112,004 270,136 624,026 1,091,228
Net cash provided
by (used in)
investing
activities (51,589) 150,813 (745,382) 54,405
Financing activities
Repurchases of
Class A common
stock (424,177) (328,391) (1,283,952) (1,140,213)
Minimum tax
withholding
paid on behalf
of employees for
restricted
stock units (12,875) (16,644) (58,061) (69,676)
Proceeds from
issuance of common
stock, net 57,271 134,267 171,853 358,629
Net cash used
in financing
activities (379,781) (210,768) (1,170,160) (851,260)
Increase (decrease)
in cash and cash
equivalents (285,213) 149,358 (995,927) 28,462
Cash and cash
equivalents at
beginning of
period 1,475,858 2,037,214 2,186,572 2,158,110
Cash and cash
equivalents at
end of period $1,190,645 $2,186,572 $1,190,645 $2,186,572
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
December September December
31, 2008 30, 2008 31, 2007
-------- -------- --------
(In thousands)
Cash and cash equivalents $1,190,645 $1,475,858 $2,186,572
Short-term marketable securities 707,477 770,872 141,728
Long-term marketable securities - 40,905 75,352
- ------ ------
Total cash, cash equivalents and
marketable securities $1,898,122 $2,287,635 $2,403,652
============ ============ ============
Decrease from prior quarter end $(389,513)
==========
Decrease from prior year end $(505,530)
==========
BROADCOM CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
December December
31, 2008 31, 2007
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $1,190,645 $2,186,572
Short-term marketable securities 707,477 141,728
Accounts receivable, net 372,311 369,004
Inventory 366,106 231,313
Prepaid expenses and other current assets 114,674 125,663
------- -------
Total current assets 2,751,213 3,054,280
Property and equipment, net 234,691 241,803
Long-term marketable securities - 75,352
Goodwill 1,279,243 1,376,721
Purchased intangible assets, net 61,958 46,607
Other assets 66,160 43,430
------ ------
Total assets $4,393,265 $4,838,193
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $310,487 $313,621
Wages and related benefits 153,772 147,853
Deferred revenue 12,338 15,864
Accrued liabilities 240,506 253,226
------- -------
Total current liabilities 717,103 730,564
Commitments and contingencies
Long-term deferred revenue 3,898 8,108
Other long-term liabilities 65,197 63,373
Shareholders' equity 3,607,067 4,036,148
--------- ---------
Total liabilities and shareholders'
equity $4,393,265 $4,838,193
========== ==========
BROADCOM CORPORATION
Unaudited Supplementary Financial Data
(In thousands)
The following table presents details of supplementary financial data included in each
functional line item in the unaudited condensed consolidated statements of operations:
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Cost of revenue:
Stock-based compensation $6,643 $6,581 $24,997 $26,470
Amortization of purchased
intangible assets 4,053 3,934 15,857 13,485
Research and development:
Stock-based compensation 95,975 89,767 358,018 353,649
Selling, general and
administrative:
Stock-based compensation 32,698 33,277 126,359 139,533
Recovery of legal fees
related to Qualcomm
litigation - - (8,569) -
Other operating expense:
Amortization of purchased
intangible assets 2,842 184 3,392 1,027
In-process research and
development (1) 31,500 - 42,400 15,470
Impairment of goodwill and
long-lived assets (2) 169,443 - 171,593 1,500
Restructuring costs
(reversal) - - (1,000) -
Settlement costs (3) - - 15,810 -
Other:
Employer payroll tax expense
on certain stock option
exercises 335 3,182 3,966 7,486
Charges related to equity
award review - - - 3,409
(Gain) loss on strategic
investments - (2,960) 4,266 1,809
Non-operating gains (10) (2,444) (203) (2,719)
(1) Recorded in connection with the company's acquisitions of the
digital television business of Advanced Micro Devices, Inc. in the
three months ended December 31, 2008 and Sunext Design, Inc. in the
year ended December 31, 2008 and in connection with the company's
acquisitions of LVL7 Systems, Octalica, Inc. and Global Locate, Inc. in
the year ended December 31, 2007.
(2) Recorded a goodwill and long-lived asset impairment charge of
$169.4 million related to the company's mobile platforms business group
in the three months ended December 31, 2008.
(3) Recorded accrued settlement costs included $12.0 million
related to Broadcom's settlement with the Securities and
Exchange Commission as well as $3.8 million related to a
patent infringement claim settlement in the year ended
December 31, 2008.
BROADCOM CORPORATION
Guidance for the Three Months Ending March 31, 2009
Three Months
Ending March 31, 2009
---------------------
Net revenue $800 to $875 million
Gross margin ~49%
Total operating expense
(including stock-based compensation) ~$541 to $547 million
Total stock-based compensation* ~$129 million
* Included in cost of revenue, research and development, and selling,
general and administrative expenses.
Broadcom has based the preceding guidance for the three months ending March 31, 2009 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of January 29, 2009. Our guidance consists of predictions only, however, and is subject to a wide range of known and unknown business risks and uncertainties, many of which are beyond our control. The forecasts and projections contained in the table above should not be regarded as representations by Broadcom that the estimated results will be achieved. Projections and estimates are necessarily speculative in nature and actual results may vary materially from the guidance we provide today.
The guidance set forth in the table above should be read together with the information under the caption, "Cautions regarding Forward-Looking Statements" above, our Annual Report on Form 10-K for the year ended December 31, 2007, subsequent Annual Report on Form 10-K for the year ended December 31, 2008 to filed in February 2009, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other Securities and Exchange Commission filings. We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein.
SOURCE Broadcom Corporation
http://www.broadcom.com
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