QCOM QUALCOMM Inc

By Maria Armental 

Broadcom Inc. plans to substantially raise payouts to shareholders on the back of strong results that mark the sixth straight quarter of more-than-doubled profit.

In the first earnings call since the company announced plans to buy software company CA Inc., news that had hit Broadcom's stock hard, Chief Executive Hock Tan defended the proposed deal saying that CA offers a "big doorway," a "new and huge opportunity."

"We're buying CA because of their customers and [CA's] importance to these customers," Mr. Tan said in the Thursday call reviewing third-quarter results. "CA sells mission-critical software to virtually all of the world's largest enterprises."

The proposed $19 billion takeover, months after its $117 billion-plus hostile bid for Qualcomm Inc. was blocked by President Trump, represents a strategic move for Broadcom and would roughly triple the size of its current opportunity in the estimated $200 billion market for infrastructure technology, Broadcom finance chief Tom Krause had previously told The Wall Street Journal in an interview.

Meanwhile, enterprise storage revenue, up nearly 60% three quarters into the company's business year, has been bolstered by last year's Brocade acquisition. Stripping out the Brocade contribution, Mr. Tan told analysts in June, that the business would be roughly flat year-over-year.

On Thursday's call, Mr. Krause said the company had fielded questions and stressed that the company doesn't see any fundamental changes in its long-term growth rate or that of its core business.

In the most recent quarter, company officials said, the wired infrastructure and enterprise storage segments again drove revenue growth, offsetting continued weakness in wireless communications segment. The wireless communications segment, Messrs. Tan and Krause said Thursday, is expected to return to double-digit revenue growth in fiscal 2020, following a temporary dip in fiscal 2019.

The enterprise storage segment, which got a big revenue boost from the Brocade acquisition, saw revenue in the latest period increase 70% from the year-ago period. But even without the Brocade contribution, Mr. Tan said, "storage was robust year-over-year in the third quarter" and storage revenue growth is expected to accelerate in the fourth quarter.

Overall, Broadcom's third-quarter profit surged to $1.2 billion, or $2.71 a share, from $481 million, or $1.14 a share, a year earlier. Profit from continuing operations rose to $4.98 a share from $4.10 a share a year earlier, while revenue from continuing operations rose 13% to $5.07 billion.

Analysts surveyed by Thomson Reuters expected a profit of $2.70 a share, or $4.83 as adjusted, on $5.07 billion in revenue.

Gross profit margin improved to 51.7% from 48.2% a year earlier.

This quarter, Broadcom expects about $5.4 billion in revenue, compared with analysts' projected $5.35 billion.

Based on that forecast and the company's performance for the first nine months of the year, Mr. Krause said Broadcom anticipates "another substantial increase" in quarterly dividend payouts.

In December, Broadcom raised the dividend payouts to $1.75 a share from $1.02 a share.

Broadcom's policy is to distribute half of its prior fiscal year free cash flow to shareholders through cash dividends, with the remainder of the money typically being used for acquisitions or to buy back stock.

As of Aug. 5, Broadcom reported more than $2 billion///$2.13 billion ///in free cash flow.

Shares, which lag the market with a 16% decline this year, rose 3.7% to $223.94 in after-hours trading.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

September 06, 2018 21:14 ET (01:14 GMT)

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