Broadcom Corporation News

Broadcom Reports Second Quarter 2008 Results

IRVINE, Calif., July 22 PRNewswire-FirstCall — Broadcom Corporation (Nasdaq: BRCM) today reported unaudited financial results for its second quarter ended June 30, 2008.

Net revenue for the second quarter of 2008 was $1.201 billion, an increase of 16.3% compared with the $1.032 billion reported for the first quarter of 2008 and an increase of 33.7% compared with the $897.9 million reported for the second quarter of 2007. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the second quarter of 2008 was $134.8 million, or $.25 per share (diluted), compared with GAAP net income of $74.3 million, or $.14 per share (diluted), for the first quarter of 2008, and GAAP net income of $34.3 million, or $.06 per share (diluted), for the second quarter of 2007.

Net revenue for the six months ended June 30, 2008 was $2.233 billion, an increase of 24.1% from the $1.799 billion reported for the six months ended June 30, 2007. Net income computed in accordance with GAAP for the six months ended June 30, 2008 was $209.1 million, or $.39 per share (diluted), compared with GAAP net income of $95.2 million, or $.16 per share (diluted), for the six months ended June 30, 2007.

Net revenue for the six months ended June 30, 2008 included royalties of $71.2 million received pursuant to a patent license agreement entered into in July 2007. The royalty received in each quarter was $35.6 million.

"Despite continued economic turmoil, demand for Broadcom's wired and wireless communications products strengthened in the second quarter," said Scott A. McGregor, Broadcom's President and Chief Executive Officer. "Our quarterly product revenue, excluding royalties, surpassed the $1.0 billion milestone for the first time in our history in the second quarter, highlighting the growing role that communications plays within our everyday lives at home, at work or while on-the-go. Broadcom excels at integrating multiple forms of communications into a single piece of silicon and is positioned to continue leading this convergence in communications."

Conference Call Information

As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its second quarter 2008 financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The company will broadcast the conference call via webcast over the Internet. To listen to the webcast, or to view the financial or other statistical information required by Securities and Exchange Commission (SEC) Regulation G, please visit the Investors section of the Broadcom website at http://www.broadcom.com/investors. The webcast will be recorded and available for replay until 5:00 p.m. Pacific Time, Tuesday, August 5, 2008.

About Broadcom

Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications. Broadcom(R) products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. We provide the industry's broadest portfolio of state-of-the-art system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. These solutions support our core mission: Connecting everything(R).

Broadcom is one of the world's largest fabless semiconductor companies, with 2007 revenue of $3.78 billion, and holds over 2,800 U.S. and 1,200 foreign patents, more than 7,300 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video, data and multimedia.

Broadcom is headquartered in Irvine, Calif., and has offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at +1.949.926.5000 or at http://www.broadcom.com.

Cautions regarding Forward Looking Statements:

All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward- looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to, references to our expectations regarding customer orders and future revenue growth and our ability to lead the convergence trends in communications. These forward- looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

These risks and uncertainties include, but are not limited to: — general economic and political conditions and specific conditions in the markets we address, including the continuing volatility in the technology sector and semiconductor industry, trends in the broadband communications markets in various geographic regions, including seasonality in sales of consumer products into which our products are incorporated, and possible disruption in commercial activities related to terrorist activity or armed conflict; — the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory; — our dependence on a few significant customers for a substantial portion of our revenue; — the gain or loss of a key customer, design win or order; — the rate at which our present and future customers and end-users adopt Broadcom's technologies and products in our target markets; — our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner; — the availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials; — intellectual property disputes and customer indemnification claims and other types of litigation risk; — risks and uncertainties resulting from Broadcom's equity award review, including potential claims and proceedings related to such matters, such as shareholder litigation and any action by the SEC, U.S. Attorney's Office or other governmental agency that has resulted in, and could result in further civil or criminal sanctions against the company and/or certain of our current or former officers, directors or employees, or other actions taken or required as a result of the review, and the extent to which we are able to receive reimbursement of our expenses related to such litigation and actions through our directors' and officers' insurance carriers. In the event that the company's coverage under these policies is reduced or denied, our financial exposure would be correspondingly increased; — our ability to retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels needed to implement our business and product plans; — the effectiveness of our expense and product cost control and reduction efforts; — our ability to scale our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers; — the quality of our products and any potential remediation costs; — competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products; — our ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets; — the risks of producing products with new suppliers and at new fabrication and assembly and test facilities; — problems or delays that we may face in shifting our products to smaller geometry process technologies and in achieving higher levels of design integration; — delays in the adoption and acceptance of industry standards in our target markets; — changes in our product or customer mix; — the volume of our product sales and pricing concessions on volume sales; — the timing of customer-industry qualification and certification of our products and the risks of non-qualification or non-certification; — fluctuations in the manufacturing yields of our third party semiconductor foundries and other problems or delays in the fabrication, assembly, testing or delivery of our products; — the risks and uncertainties associated with our international operations, particularly in light of terrorist activity, armed conflict or political unrest; and — the level of orders received that can be shipped in a fiscal quarter.

Our Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements in this release and the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

Broadcom(R), the pulse logo, Connecting everything(R) and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners. BROADCOM CORPORATION Unaudited Condensed Consolidated Statements of Income (In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2008(a) 2007 2008(a) 2007 Net revenue $1,200,931 $897,920 $2,233,141 $1,799,401 Cost of revenue 554,596 437,037 1,035,759 877,986 Gross profit 646,335 460,883 1,197,382 921,415 Operating expense: Research and development 380,035 332,130 735,723 632,940 Selling, general and administrative 142,017 119,859 253,963 248,506 Amortization of purchased intangible assets 184 200 367 529 In-process research and development - 10,200 10,900 10,500 Restructuring costs (reversal) (1,000) - (1,000) - Impairment of other intangible assets 1,900 - 1,900 1,500 Settlement costs - - 15,810 - Income (loss) from operations 123,199 (1,506) 179,719 27,440 Interest income, net 12,428 32,904 32,532 69,912 Other income (expense), net (191) 642 733 (767) Income before income taxes 135,436 32,040 212,984 96,585 Provision (benefit) for income taxes 647 (2,216) 3,881 1,338 Net income $134,789 $34,256 $209,103 $95,247 Net income per share (basic) $.26 $.06 $.40 $.17 Net income per share (diluted) $.25 $.06 $.39 $.16 Weighted average shares (basic) 512,875 540,851 521,606 544,356 Weighted average shares (diluted) 529,977 575,115 534,902 580,427 (a) Includes royalties in the amount of $35.6 million and $71.2 million in the three and six months ended June 30, 2008, respectively, received pursuant to a patent license agreement entered into in July 2007.

The following table presents details of total stock-based compensation expense included in each functional line item in the unaudited condensed consolidated statements of income above:

Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Cost of revenue $6,237 $6,861 $11,702 $12,675 Research and development 90,003 90,832 168,709 169,263 Selling, general and administrative 31,268 36,607 60,333 69,233 BROADCOM CORPORATION Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Operating activities Net income $134,789 $34,256 $209,103 $95,247 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,115 15,725 35,364 29,024 Stock-based compensation expense: Stock options and other awards 57,178 86,053 115,207 165,198 Restricted stock units issued by the company 70,330 48,247 125,537 85,973 Acquisition-related items: Amortization of purchased intangible assets 4,118 2,766 8,236 6,145 In-process research and development - 10,200 10,900 10,500 Impairment of intangible assets 1,900 - 1,900 1,500 Loss on strategic investments, net 1,760 11 1,760 2,648 Changes in operating assets and liabilities: Accounts receivable (117,396) (19,280) (110,815) 3,179 Inventory (34,944) 9,087 (25,033) 11,470 Prepaid expenses and other assets 25,054 (356) 18,758 (16,646) Accounts payable 77,815 (10,873) 123,829 10,602 Accrued settlement liabilities (12,000) - (2,000) (2,000) Other accrued and long-term liabilities 20,386 (17,359) (26,573) 293 Net cash provided by operating activities 247,105 158,477 486,173 403,133 Investing activities Net purchases of property and equipment (23,405) (43,415) (49,067) (107,379) Net cash paid for acquisitions and other purchased intangible assets (9,943) (30,275) (29,738) (77,952) Sale (purchases) of strategic investments - 306 (355) (3,194) Purchases of marketable securities (202,272) (188,164) (337,466) (457,096) Proceeds from sales and maturities of marketable securities 72,415 285,978 220,598 664,132 Net cash provided by (used in) investing activities (163,205) 24,430 (196,028) 18,511 Financing activities Repurchases of Class A common stock (444,131) (216,226) (835,863) (641,288) Minimum tax withholding paid on behalf of employees for restricted stock units (13,623) (12,588) (25,753) (36,579) Proceeds from issuance of common stock, net 78,300 61,625 90,614 142,450 Net cash used in financing activities (379,454) (167,189) (771,002) (535,417) Increase (decrease) in cash and cash equivalents (295,554) 15,718 (480,857) (113,773) Cash and cash equivalents at beginning of period 2,001,269 2,028,619 2,186,572 2,158,110 Cash and cash equivalents at end of period $1,705,715 $2,044,337 $1,705,715 $2,044,337 UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION June 30, March 31, December 31, 2008 2008 2007 (In thousands) Cash and cash equivalents $1,705,715 $2,001,269 $2,186,572 Short-term marketable securities 228,418 90,033 141,728 Long-term marketable securities 105,513 114,456 75,352 Total cash, cash equivalents and marketable securities $2,039,646 $2,205,758 $2,403,652 Decrease from prior quarter end $(166,112) Decrease from prior year end $(364,006) BROADCOM CORPORATION Unaudited Condensed Consolidated Balance Sheets (In thousands) June 30, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $1,705,715 $2,186,572 Short-term marketable securities 228,418 141,728 Accounts receivable, net 479,832 369,004 Inventory 256,346 231,313 Prepaid expenses and other current assets 89,815 125,663 Total current assets 2,760,126 3,054,280 Property and equipment, net 252,890 241,803 Long-term marketable securities 105,513 75,352 Goodwill 1,386,642 1,376,721 Purchased intangible assets, net 38,371 46,607 Other assets 56,812 43,430 Total assets $4,600,354 $4,838,193 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $435,082 $313,621 Wages and related benefits 124,276 147,853 Deferred revenue 7,514 15,864 Accrued liabilities 259,617 253,226 Total current liabilities 826,489 730,564 Commitments and contingencies Long-term deferred revenue 5,878 8,108 Other long-term liabilities 64,217 63,373 Shareholders' equity 3,703,770 4,036,148 Total liabilities and shareholders' equity $4,600,354 $4,838,193 BROADCOM CORPORATION Unaudited Supplementary Financial Data (In thousands) The following table presents details of supplementary financial data included in each functional line item in the unaudited condensed consolidated statements of income: Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Cost of revenue: Stock-based compensation $6,237 $6,861 $11,702 $12,675 Amortization of purchased intangible assets 3,934 2,566 7,869 5,616 Research and development: Stock-based compensation 90,003 90,832 168,709 169,263 Selling, general and administrative: Stock-based compensation 31,268 36,607 60,333 69,233 Recovery of legal fees related to certain litigation - - (8,569) - Other operating expense: Amortization of purchased intangible assets 184 200 367 529 In-process research and development (1) - 10,200 10,900 10,500 Impairment of intangible assets 1,900 - 1,900 1,500 Settlement costs (2) - - 15,810 - Restructuring costs (reversal) (1,000) - (1,000) - Other: Employer payroll tax expense on certain stock option exercises 1,169 934 2,099 2,820 Charges related to equity award review - (25) - 3,409 Loss on strategic investments, net 1,760 11 1,760 2,648 Non-operating gains - (126) - (129) (1) Recorded in connection with the company's acquisition of Sunext Design, Inc. in the six months ended June 30, 2008 and in connection with the company's acquisition of LVL7 Systems and Octalica, Inc. in the six months ended June 20, 2007. (2) Recorded accrued settlement costs included $12.0 million related to Broadcom's settlement with the Securities and Exchange Commission as well as $3.8 million related to a patent infringement claim in the six months ended June 30, 2008. Broadcom Trade Press Contact Bill Blanning Vice President, Global Media Relations 949-926-5555 blanning@broadcom.com Broadcom Investor Relations Contact T. Peter Andrew Vice President, Corporate Communications 949-926-5663 andrewtp@broadcom.com

SOURCE Broadcom Corporation; BRCM Corporate

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