Broadcom expects better 2020, partly with core semiconductor growth

Broadcom expects its fiscal 2020 revenues to grow 11% to about $25 billion after a year of seeing an 8% decline in its semiconductor segment sales.

The semiconductor and infrastructure software company reported late Thursday that its fiscal fourth quarter, ended Nov. 3, was up by 6% from the prior year period. Full fiscal year revenue was a record $22.5 billion, up 8% from the prior year. Net income for the quarter was $847 million and for the full year was $2.7 million. 

CEO Hock Tan said that infrastructure software more than offset the semi decline, benefiting from integration of CA into Broadcom. “We continue to believe that our core semiconductor business is bottoming and will return to year-over-year growth in the second half of our fiscal year,” he said in a statement. Also, he predicted benefits from integrating the business of Symantec Enterprise Security, acquired formally in November.

In an earnings call, Tan said Broadcom’s semi segment is increasingly being thought of as a core and fabless semiconductor business consisting of networking, broadband and storage products that are focused on enterprise service providers and cloud infrastructure, according to a Seeking Alpha transcript. Infrastructure software is also “quite complementary” of those semi sales.

“We plan to increase our investment in our core semiconductor businesses to position ourselves for expected future growth,” Tan added. Citing a tough year for semiconductors in general, the company’s core semi business “held up reasonably well,” he added. That portion did $11 billion in sales in 2019, which was down less than 4%, he noted.

Broadcom was one of many semi companies hurt by U.S. trade tensions with China. Chinese telecom equipment maker Huawei bought nearly $1 billion in Broadcom chips in 2018 but the U.S. blacklisted Huawei in May of 2019 and Broadcom dropped its sales forecast by $2 billion in June.

In September, Tan had predicted a “very low-growth, uncertain macro environment for the foreseeable future,” adding that the trade dispute had created uncertainty. 

RELATED: Semi demand “has bottomed out,” Broadcom CEO declares

Investors in semiconductors have carefully watched U.S. and China trade negotiations although there was disagreement on the latest developments. China said early Friday it has agreed to the text of a trade deal and that the Trump administration will cancel U.S. tariffs on Chinese goods in phases.

 On Thursday, President Trump approved a phase-one trade pact saying the U.S. will reduce existing tariffs on Chinese imports and cancel tariffs that were expected to take effect Sunday in exchange for a pledge from Beijing to buy U.S. farm products, according to the Wall Street Journal and other reports.

Broadcom’s stock price was $317.25 early Friday, down by about 3%.