Avago Results Top Estimates; Outlook Upbeat

(RTTNews) - Singapore-based chip maker Avago Technologies Ltd. (AVGO) said Tuesday after the markets closed that its third quarter profit fell slightly from last year, as higher costs and expenses more than offset a 6% rise in revenue.

However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenue. At the same time, the company gave an upbeat revenue outlook for the current quarter.

"During the third quarter, strong demand from datacenter spending and a significant uptick in industrial more than offset weaker than expected demand in wireless." said Hock Tan, President and CEO of Avago Technologies Limited.

Avago shares are currently gaining 5.98% in after hours trading after closing the day's regular trading session at $36.56, down 92 cents or 2.47%. The stock trades in a 52-week range of $30.50 to $39.74.

The company's gross margin for the quarter narrowed to 47.2% from 48.7% a year earlier, while adjusted gross margin shrank to 50.9% from 51.2% last year.

Operating expenses for the third quarter rose 12.3% to $164 million from $146 million in the third quarter of last year.

For the third quarter ended August 4, 2013, the company reported net income of $142 million or $0.56 per share, compared to $145 million or $0.58 per share for the year-ago quarter.

Excluding items, adjusted net income for the third quarter was $188 million or $0.74 per share, compared to $182 million or $0.72 per share in the prior year quarter.

On average, 8 analysts polled by Thomson Reuters expected the company to earn $0.61 per share for the third quarter. Analysts' estimates typically exclude special items.

Net revenue for the third quarter rose 6% to $644 million from $606 million in the same quarter last year. Nine analysts had a consensus revenue estimate of $622.78 million for the third quarter.

The latest quarter revenue includes $21 million contribution of net revenue from CyOptics Inc., which was acquired on June 28.

Looking forward, the company forecasts fourth quarter revenue to grow 12% to 15% sequentially, implying revenue of $721.28 million to $740.60 million. Analysts currently expect the company to post revenue of $696.92 million for the fourth quarter.

Gross margin for the fourth quarter is expected to be 46.0% plus/minus 1%, while adjusted gross margin for the quarter is expected to be 50.0% plus/minus 1%.

"Momentum in our business continues into the fourth quarter. We expect very strong product ramps in wireless and sustained growth in non-CyOptics wired, together with a full quarter of CyOptics revenue, to drive double-digit sequential revenue growth on a percentage basis."