However, one dark spot was the $501 million impairment charge that Broadcom had to take on account of its February 2012 acquisition of NetLogic Microsystems, which it had originally acquired for $3.7 billion. But, when you look forward, things seem brighter. According to IDC (link opens PDF), spending on cloud services is expected to clock in at $60 billion by 2020, and Broadcom has some innovations up its sleeve to benefit from this growth.
The company recently unveiled an industry-leading communications processor and states that its performance is unmatched. Hence, it is not surprising that this segment is expected to be up on the strength in the datacenter market.
More catalysts
The deployment of LTE networks across the globe, especially in the U.S. and China, should aid Broadcom, as it is witnessing strength at service providers as well. Management stated over the previous conference call that it is expecting gains from a tender in China, which is not surprising, as many companies in the country are moving to deploy LTE.
For instance, China Mobile Ltd. (ADR) (NYSE:CHL) is preparing to deploy TD-LTE in the region and it had initiated a big LTE tender in June, the largest in its history, according to China Daily. The source also states that China Mobile Ltd. (ADR) (NYSE:CHL)’s capital spending is expected to jump almost 50% this year to around $30 billion, and 50% of that is expected to be allotted for TD-LTE deployment. ZTE, which recently selected Broadcom’s small cell baseband processor, is a key China Mobile Ltd. (ADR) (NYSE:CHL) supplier, and this might help Broadcom’s prospects as well.
Broadcom cited strength on carrier spending in the U.S. as well, which is, again, not surprising. While it’s no secret that the likes of AT&T and Verizon have been dominant players in LTE in the U.S., the emergence of others such as Sprint Nextel Corporation (NYSE:S), would provide further opportunities for Broadcom.
After its acquisition by SoftBank, Sprint Nextel Corporation (NYSE:S) will be spending $16 billion in the next two years to expand its LTE services, which is double of what it currently spends. Sprint Nextel Corporation (NYSE:S)’s LTE currently covers 90 cities, but the company has plenty of spectrum, and with SoftBank’s financial muscle, it should be able to increase that number.
Hence, it is clear that Broadcom Corporation (NASDAQ:BRCM) doesn’t rely on just one business and pinning the company’s future performance on just one of its three pillars is unwise. All of the company’s end-markets look good for the long run, and I won’t be surprised if things get better from here.
The article A Few More Reasons Why This Stock Was Unfairly Punished originally appeared on Fool.com and is written by Harsh Chauhan.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile. Harsh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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