Avago Technologies Profit Down, But Tops View; Shares Up

(RTTNews) - Avago Technologies Ltd. (AVGO) Wednesday reported a decline in profit for the fourth quarter despite higher revenues, as the Singapore-based chip maker was hurt largely by higher operating costs and restructuring charges as well as income tax expenses. Nonetheless, both earnings and revenue for the quarter topped Wall Street estimates. Following the news, shares of Avago gained 6 percent in the after-hours trade. Avago's fourth-quarter profit dropped to $135 million or $0.50 per share from last year's profit of $172 million or $0.68 per share.

Excluding one-time items, adjusted earnings from continuing operations for the quarter rose to $556 million to $1.99 per share from $227 million or $0.89 per share a year ago. On average, 21 analysts polled by Thomson Reuters expected earnings of $1.68 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the fourth quarter rose to $1.59 billion from $738 million a year ago. Analysts had a consensus revenue estimate of $1.55 billion for the quarter.

Avago completed its $6.6 billion acquisitions of chip maker LSI Corp., in May and of PLX Technology Inc., in August. The company also recently completed its dispositions of LSI's flash and Axxia networking businesses to Seagate Technology and Intel Corp, respectively, which it has classified as discontinued operations.

Gross margins for the quarter improved to 50 percent from 47 percent last year. Research and development expenses for the quarter increased to $234 million from $109 million a year ago, while selling, general, and administrative costs rose to $129 million from $60 million.

The company recorded amortization of intangible assets of $91 million for the quarter, while restructuring charges were $33 million. Provisions for income tax were $126 million, up from $8 million last year.

Looking forward to the first quarter, Avago expects revenue to be flat to up 4 percent on a sequential basis.

AVGO closed Wednesday's trading at $95.13, up $2.93 or 3.18%, on the Nasdaq. The stock further gained $5.87 or 6.17%, in the after-hours trade.