Why Broadcom Ltd(NASDAQ: AVGO) stock is surging

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Broadcom Ltd(NASDAQ: AVGO) stock reported the fourth quarter of 2017 revenue rise of 17% yoy to $4.85 billion and 9% against the last quarter. Earnings per share were rose 32% yoy to $4.59 while operating margins reached 47%, which is much ahead of their long-term operating margin target of 45%. As a result, the group’s better free cash flow generation in 2017 led to 72% rise in their dividends.

Their servers and storage connectivity business showed better demand driven by the Purley server launch cycle. They forecasted their Purley launch to continue to gain traction in the first quarter of 2018 and drive very strong growth in demand for their several storage connectivity products. The group forecasts their HDD described demand to improve.

From the first quarter of fiscal 2018, their enterprise storage segment would comprise Brocade Fiber Channel SAN business which is forecasted to generate a partial quarter revenue contribution of $250 million in Q1 fiscal ’18. Their storage landscape is forecasted to perform well by their products supporting the adoption of All-Flash arrays in storage appliances infrastructure with their PCI Express and NVMe technology. The group expects to continue to execute their M&A strategy and intends to finish their Brocade acquisition by the early first quarter of fiscal 2018.

As per their fourth-quarter wireless performance, the revenue surged 33% yoy to $1.8 billion and accounted 37% of total revenue. Rising shipments of next-generation platform from large North American smartphone customer drove the momentum, which also offset a decline in shipments to other customers. Enterprise storage revenue enhanced 15% yoy to $645 million and accounted 13% of October revenue. Industrial segment revenue reached $257 million while accounted 5% of total revenue. Revenue for this segment surged 59% on a year-on-year basis and 8% sequentially despite the impact from a large increase in their IP licensing revenue. The group made a made a proposal to acquire Qualcomm for a per share consideration of $70 in cash and stock. They forecast the proposed transaction to finish within over 12 months post the signing of a definitive agreement.

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