Broadcom Stock Hit Hard, Twice, as Short-Term Outlook Darkens

After losing nearly 17% of its share price in Nasdaq trading Thursday, Broadcom Corp. endured an extra beating in the after-hours market after a key competitor warned it would fall short of forecasted results in the current quarter.

Shares of Broadcom, the Irvine maker of high-speed communications chips, lost $20.94, or 16.7%, to close at $104 Thursday. In after-hours trading, the stock tumbled to $90 per share.

Rival chip maker PMC-Sierra Inc., based in Campbell, said declining orders toward the end of its previous quarter could affect the company’s results this quarter.

Shares of PMC-Sierra lost $7.25, or 7%, in Nasdaq trading Thursday to close at $95.88. On news of its forecast, the stock plunged to $64 per share after trading hours.

PMC-Sierra is being hurt by a slowdown in capital spending by telecommunications service providers, the company said.

Broadcom’s initial losses came after analysts at Credit Suisse First Boston lowered their price target on the stock from $300 to $175 on concerns that the overall market is slowing and predictions of a price war in a key market this summer. The firm still rates Broadcom a “buy” for long-term investors.

“Long term, Broadcom is going to be one of the leaders” in communications chips, said analyst Charles Glavin of Credit Suisse First Boston. “It’s just that some of their markets right now are slowing, and they have to use acquisitions and other means to grow.”

This year “could be Broadcom’s most challenging as a public company,” Glavin predicted in a note published Thursday. The note suggested that Broadcom’s fourth-quarter earnings of 32 cents per share, a penny ahead of forecasts, were the result of a lower share count and higher interest income than analysts had expected, not better net income.

Glavin predicted the semiconductor market will continue to be skittish, at least until Internet networking giant Cisco Systems Inc., a key customer for many communications chip makers, reports its quarterly earnings Feb. 6.

One Broadcom shareholder that got out ahead of the slide is ATI Technologies Inc., the world’s biggest maker of graphics parts for personal computers. The Markham, Ontario, company said Thursday that it sold 494,000 shares in Broadcom on Jan. 17 for cash proceeds of $65 million, giving it a gain of about $54 million. It didn’t list a per share price. Broadcom stock closed that day at $128.69 a share.

ATI obtained the shares in December when Broadcom acquired SiByte Inc. in a stock swap. ATI had owned 11% of SiByte.