Avago Posts Higher Profit

(RTTNews) - Singapore-based chip maker Avago Technologies Ltd. (AVGO) said Wednesday after the markets closed that its fourth quarter profit rose a modest 8% from last year, as higher costs and expenses dented a 19% revenue growth.

The company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenue.

"Major product ramps at both of the largest smartphone OEM customers, continued strength in datacenter spending and a stronger than expected contribution from the CyOptics business helped drive sequential revenue growth of 15% in the fourth quarter," said Hock Tan, President and CEO of Avago. "Looking into the first quarter of 2014 we expect revenue to decline in all of our target markets with our typical seasonality. We also expect wireless will continue to face volatility throughout the year caused by major product launches."

Avago shares are currently losing 1.12% in after hours trading after closing the day's regular trading session at $44.50, down 28 cents. The stock trades in a 52-week range of $30.50 to $47.21.

The company's gross margin for the quarter narrowed to 46.7% from 48.4% a year earlier, while adjusted gross margin shrank to 50.5% from 51.1% last year.

Operating expenses for the fourth quarter rose 29.6% to $175 million from $135 million in the fourth quarter of last year.

For the fourth quarter ended November 3, 2013, the company reported net income of $172 million or $0.68 per share, compared to $159 million or $0.64 per share for the year-ago quarter.

Excluding items, adjusted net income for the fourth quarter was $227 million or $0.89 per share, compared to $194 million or $0.77 per share in the prior year quarter.

On average, 14 analysts polled by Thomson Reuters expected the company to earn $0.82 per share for the fourth quarter. Analysts' estimates typically exclude special items.

Net revenue for the fourth quarter rose 19.4% to $738 million from $618 million a year ago. Eighteen analysts had a consensus revenue estimate of $731.57 million for the fourth quarter.

Looking forward, the company said it expects first quarter revenue to decline 3% to 6% sequentially, implying revenue of $693.72 million to $715.86 million. Analysts currently expect the company to post revenue of $704.23 million for the first quarter.

Gross margin for the first quarter is expected to be 47.0% plus/minus 1%, while adjusted gross margin for the quarter is expected to be 50.5% plus/minus 1%.