Broadcom Plunges on Q1 Warning

Broadcom (Nasdaq: BRCM) plunged US$4.88to $43 in morning trading Wednesday, after the company warned thatfirst-quarter results are likely to fall below expectations, as demand forits products slumped last month.

“As the U.S. economy continues to slow, we, like others in our industry, areexperiencing a significant slowdown in customer orders,” said president andchief executive officer Henry T. Nicholas III.

Revenue will likely total $315 million to $325 million, with pro formaearnings of 8 to 9 cents per share, Broadcom said. Analysts had expected thecompany to earn 25 cents.

“Along with all of our customers and peers, we are now experiencing theeffects of the sharp downturn in the U.S. economy,” said Nicholas.

Orderdelays beginning in February, along with the termination of a “significant”contract, indicate that “the isolated signs of softness we had seen earlierhave now become widespread, and we do not currently have the visibility tobe able to predict when this softness will abate,” he said.

In addition, Broadcom said the downturn in the market has “affected theeconomics” of product purchase and development agreements entered into bycompanies acquired by Broadcom. Altima, the first of five companiespurchased, recently lost a contract from 3Com, its major customer, Broadcom said.

In light of that cancellation, Broadcom said it is consideringchanging the way it accounts for the transactions, and is in talks with itsauditors and U.S. Securities and Exchange Commission staff on the appropriatestandards.

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