(BRCM) Broadcom Offers $500 Million Senior Notes

Leading chipmaker Broadcom Corporation (BRCM) recently announced that the company will offer $500 million of senior notes.

The company expects to use the net proceeds from the offering to fund a portion of its proposed acquisition of NetLogic Microsystems and other general corporate purposes.

In September, Broadcom Corporation announced that it will acquire NetLogic Microsystems for $3.7 billion or $50 per share.

Headquartered in Santa Clara, California, NetLogic develops high-performance intelligent semiconductor solutions that power next-generation Internet networks.

The transaction is expected to close in the first half of 2012.  Broadcom expects the acquisition to be accretive to bottom-line by approximately $0.10 (excluding onetime items) in 2012.

Management expects the acquisition to broaden Broadcom’s infrastructure portfolio with a number of critical new product lines and technologies, including knowledge-based processors, multi-core embedded processors, and digital front-end processors. The company stated that  through this acquisition, Broadcom will acquiring a leading multi-core embedded processor solution, market leading knowledge-based processors, and unique digital front-end technology for wireless base stations that are key enablers for the next generation infrastructure build-out.

Last month, Broadcom generated revenues of $1.96 billion in the third quarter of 2011, up 8.4% year over year.

In terms of end-markets, the Broadband Communications revenue increased 2% sequentially, driven by solid sales from core set-top boxes partially offset by a decline in broadband modem business.

The Infrastructure & Networking business was up 4% sequentially driven by a rebound in controller solutions, microwave sales and growth in switching products. Enterprise revenue was better than management expectations. Data Center sales increased sequentially, but service provider solutions were soft.

The Mobile and Wireless business grew 16% sequentially driven by a significant expansion in sales across wireless connectivity and cellular baseband solutions. Within the cellular baseband market, Broadcom is pleased with the significant growth in 3G shipments to Samsung and multiple other handset OEMs.

Broadcom’s net income came in at $270 million or $0.48 per diluted share compared to a net income of $175 million or $0.31 per diluted share in the previous quarter and a net income of $328 million or $0.60 per diluted share in the year-ago quarter. The net income per share came reported in the quarter missed the Zacks Consensus Estimate of $0.40.

For the fourth quarter of 2011, Broadcom projects revenues around $1.7 billion – $1.8 billion. Management expects revenues from all segments to be down sequentially across all segments driven by softness in general demand. The company expects revenues from Mobile & Wireless business to decline sequentially.

We continue to maintain a Neutral recommendation on Broadcom. Our Neutral recommendation is supported by Zacks #3 Rank, which translates into a short-term rating of Hold.

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