Broadcom CorporationBRCM

Morningstar Rating

Stock Research and Analysis

by Brian Colello, CPA

Broadcom provides chips that power some of today's most popular technologies, and we expect the firm to grow along with the expansion of its various end markets. However, Broadcom hasn't been focused on delivering outstanding returns to investors in Read more

Bulls Say

Broadcom is the market share leader in providing chips for technologies such as enterprise networking, cable modems, and set-top boxes.

Both consumer demand and technological innovation are pushing toward integrated technology such as the iPhone. Broadcom has a demonstrated talent for integration, and it should profit from this trend over the next five to 10 years.

Broadcom has an extensive research and development staff, as 73% of its employees work in R&D. This impressive human capital should help the firm develop and integrate new technologies.

Broadcom won several major contracts for its new mobile phone chips with top-tier producers such as Samsung and Nokia. This lends significant credibility to its mobile phone offering.

Broadcom's diverse portfolio of semiconductor chips makes its revenue base less volatile than many of its competitors. Read more

Bears Say

Broadcom's very generous stock compensation program, which comprised almost 11% of revenues in 2008, has consistently eaten away at operating margins and diluted current shareholders' equity.

Broadcom's emphasis on mobile chips pits them against titans such as Texas Instruments TXN and Qualcomm in a ferociously competitive market.

The company's financial results and reputation have been tarred from recent stock option backdating scandals.

Broadcom's customers primarily consist of a handful of large, powerful device makers that can ultimately exert pricing pressure on the firm. Read more

Strategy

We expect Broadcom to continue with its strategy of integrating new and innovative features, whether acquired or developed internally, into its SoC solutions. Broadcom's strength in integration has helped Read more

Management

Broadcom's current management team must overcome the less-than-stellar reputation earned by its predecessors. The company was co-founded in 1991 by Henry Samueli and Henry Nicholas III. Samueli, among other officers, is currently subject to a civil Read more

Profile

Broadcom designs and markets a wide portfolio of semiconductor chips for wired and wireless communications applications such as modems, networking equipment, and mobile Read more

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