Broadcom (BRCM) Whacked on Samsung/CSR Competitive Fears; Deutsche Bank Weighs In

July 17, 2012 11:12 AM EDT
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Price: $54.67 --0%

Rating Summary:
    22 Buy, 32 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 7 | Down: 10 | New: 7
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Shares of Broadcom (NASDAQ: BRCM) are getting hit Tuesday on competitive fears after Samsung announced the purchase of CSR's handset connectivity operations.

Analysts at Deutsche Bank have now weighed in on the news: "We believe this deal is another step in Samsung’s long-term strategy to “in-source” components for its handset business, as it has done so in memory, displays and application processors for many years and more recently for LTE basebands. Due to the length of the development and evaluation lifecycle required for handsets, we think Samsung stays on its existing connectivity roadmap (including use of BRCM’s combo chips) in the near/medium-term with the potential to adopt CSR acquired connectivity solutions likely to occur no sooner than 2015 (CSR’s next-gen combo chips were not expected to be released until 2014). Also given that CSR’s connectivity portfolio has been centered around discrete solutions, we believe BRCM industry leading 40nm combo solution will continue to offer superior performance, cost and compatibility with latest wireless standards such as 5G and therefore remain the preferred solution for Smartphone OEMs."

The firm sees no impact to BRCM's near term revenues or earnings from this deal and leave our CY12 and CY13 rev/EPS estimates unchanged at $8b (+8% y/y)/$2.90 and $8.9b (+12% y/y)/$3.20, respectively.

They expect the company to deliver in-line 2Q results with 3Q guidance likely in-line with our recently trimmed ests, slightly below Street consensus but likely above buy-side fears.

Deutsche Bank maintained their Buy and price target of $40.

For an analyst ratings summary and ratings history on Broadcom click here. For more ratings news on Broadcom click here.

Shares of Broadcom are down 5.7 percent to $29.05.

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