Broadcom sweeps up winnings after enterprise storage gamble pays off

It wasn't all Brocade! insists CEO as revenues jump 13%

Data centres and storage sales sent Broadcom's third-quarter earnings sailing past estimates, thanks in part to the buy of Brocade.

The company, HQ'd in San Jose, was chuffed to report quarterly revenues of $5.06bn, up 13 per cent year-on-year.

Wired infrastructure continued to contribute the lion's share of the sales, $2.3bn, up four per cent on a year ago, though storage kit brought in $1.253bn, growing 70 per cent.

To be fair, having spanked the best part of $5.9bn on Fibre Channel darling Brocade at the end of 2017, eyebrows would have headed skywards had there not been a noticeable uptick in revenues.

President and CEO Hock Tan was quick to point out that even without Brocade, Broadcom saw robust year-on-year enterprise IT spending.

Tan went on to explain the marginal rise in the company's core wired infrastructure business was largely down to a "cyclical headwind" in its broadband business, with soft demand in China and North America fingered. However, the cloud appears to have ridden to the rescue, as enterprise networking and compute offload grew 10 per cent from last year and accounted for 60 per cent of the wired business.

Broadcom has, however, warned analysts not to expect gangbuster growth any time soon in its wired world. The chip-slinger forecast continued single-digit growth into the fourth quarter as those pesky headwinds continue.

Wireless revenues were also flat, growing less than a percentage point to $1.288bn. Tan said Broadcom could benefit from a seasonal ramp by a mystery "North American OEM" customer (spoiler: probably Apple), which could push revenue past 25 per cent as a proportion of the chip maker's total. However, the fact that the last generation of wireless chippery will do just fine thanks, is a problem. R&D is expensive, and Broadcom needs customers using the latest and greatest.

As if to underline the importance of the near-mythical 5G platform to chipmakers, Broadcom insisted that the imminent need for the technology should sustain a return to an annual upgrade cadence and a return to double-digit growth by fiscal year 2020. 2019, on the other hand, is looking a bit sticky, according to Tan.

Finally, while the Q word didn't get a mention, Tan did take some time to explain the frankly bizarre purchase of CA Technologies once again. And no, it wasn't because the semiconductor giant had a few billion lying around after being blocked from acquiring Qualcomm. The Broadcom CEO gave a refreshingly straightforward answer instead: "We're buying CA because of the customers and their importance to these customers." ®




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