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Coronavirus Worries Forces Broadcom To Withdraw Its Revenue Forecast For 2020

Coronavirus Worries Forces Broadcom To Withdraw Its Revenue Forecast For 2020
Chipmaker Broadcom Inc is another major tech company that has said that its performance would be affected by the global spread of the coronavirus as the company brought down its earlier forecast for the current year.
Broadcom is just another chip maker that have been forced to either cut or pulled their sales outlook because of disruption to supply and demand for their products because of the fast spreading of the coronavirus.
Supplying chips to Apple Inc accounted for almost 20 per cent of the total revenues generated by the company in 2019. However it is estimated that its forecasts have been affected because of Apple announcing a revenue and profit warning last month because of a drastic drop in supply and demand of its products in China because of the coronavirus outbreak there.
Talking to the media and investors while making the announcement, Broadcom Chief Executive Officer Hock Tan negated the recent reports that had claimed that the company has been contemplating putting up for sale one of its wireless chip units.
“We have come to the conclusion that continuing to invest in and operate our wireless assets will create the most value for our business and for our shareholders,” Tan said on a conference call with analysts.
The first report on this issue was published by the Wall Street Journal in December claiming that the company was working with Credit Suisse on a possible deal to sell its radio frequency segment. However the report has also stated that the process was in its early stages.  
The company will continue to supply its radio frequency components that it manufactures for the next three generations of 5G phones that are made by its top customer – which analysts believe is Apple Inc, Tan said.
The global outbreak of the coronavirus – particualry its devastating impact in China, had not impacted Broadcom’s global supply to any “meaningful level”, Tan said, but also added that the company was witnessing a significant drop in demand.  
“There is no doubt COVID-19 has created a high level of uncertainty, which we can’t help but think is going to have an impact on our semiconductor business, in particular, in the second half of the fiscal year,” he said.
Retracting its previous forecast, the chipmaker now expects its revenues for the second quarter to come in at $5.7 billion, with a plus or minus $150 million possibility. That number was well below the analysts’ average estimate of $5.94 billion, according to IBES data from Refinitiv.
The company reported a 1.2 per cent growth in its net revenue for the first quarter at $5.86 billion which was slightly below the expectations of the market of $6 billion.
Excluding items, Broadcom reported a profit of $5.25 per share compared to the expectations of analysts at $5.33 per share. The stock price of the company dropped by almost 9 per cent on Friday after this declaration made by the company even as there was a sell-off in the broader market. The stocks of the company had dropped by almost 11 per cent on Thursday.

Christopher J. Mitchell

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