Broadcom Earnings Call INSIGHTS: Product Launches, Bookings Linearity Impact

On Tuesday, Broadcom Corporation (NASDAQ:BRCM) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Product Launches

Glen Yeung – Citi: The first question is about inventories that you see out there in the various end markets. What kind of condition do you think that they are in?

Scott A. McGregor – President and CEO: I think normally we have some customers who have a little bit of inventory, some customers who are running to lean. I would say that they’re pretty typical inventory situation right now, nothing particularly unusual.

A Closer Look: Broadcom Earnings Cheat Sheet>>

Glen Yeung – Citi: Then second question is, just thinking about the timing of some of the product launches that you’ll benefit from in the second half of year, and I wonder if the kind of the way your customers are launching products now adjust or alter the typical seasonality we would have seen from Broadcom, let’s say, over the last five or 10 years?

Eric K. Brandt – EVP and CFO: I don’t think so. I mean our seasonality is such that we would typically ship for the holiday season in consumer devices in Q3. We tend to be sort of a leading indicator of the end product demand as opposed to a lagging indicator. And as we’ve discussed many times, typical seasonality is down mid-single digits Q1, up high single-digits Q2, Q3, and usually flat to down a couple of points in Q4. I don’t know that – seasonality is probably more affected I would say by the aggregate growth rate of the business and the industry than the ramp pattern of the customers, which we will normally shift for the holiday season in the early part of Q4, which means they need product from us in Q3.

Bookings Linearity Impact

Ross Seymore – Deutsche Bank: I guess the first one for Scott similar to what was asked in the prior question. Macro is impacting many of your competitors; can you just talk about if you are seeing any impact in the bookings linearity? Any end-market color that shows any weakening versus what you had as prior expectations?

Scott A. McGregor – President and CEO: I think we’re definitely seeing some softness in Europe and a little bit of scattered softness in parts of Asia. So, macro economy definitely does affect us. I think what’s different for us is we do believe we’re taking share and so we think we’ve been able to offset some of the macro headwind with the ability to take share in a number of our markets.

Ross Seymore – Deutsche Bank: Then, my follow-up for Eric. On the gross margin side of things, you are guiding it flat. It seems like as opposed to the second quarter, the third quarter mix might be a little bit negative given the end-market splits that you’re talking about. Can you just walk us through the puts and takes to getting your gross margin flat, please?

Eric K. Brandt – EVP and CFO: Sure. You’re absolutely correct. So, given the up significantly for the Mobile & Wireless segment, which tends to be below our corporate average gross margin to some degree it does create a headwind to the gross margin. We are offsetting that with a couple of different things, some positive mix and other parts of the business, as well as some absorption benefits that we get in the business. So, in fact, the fact that we’re actually holding gross margin flat in the phase of such strength in Mobile & Wireless, we think is a good sign for our gross margin in general.