Broadcom cuts revenue targets as demand dips
Published: 08 Feb 2001 17:38 GMT
Henry Nicholas, chief executive of communications chipmaker Broadcom, said Wednesday said that revenue growth in the current quarter would likely be lower than earlier expected.
"We are still seeing growth," Nicholas said at the Banc of America Securities Conference in San Francisco. "But we're not experiencing the kind of growth were expecting in our previous guidance.
Broadcom, one of the leaders in the expanding market for communications processors, said earlier that first-quarter revenue would be up 22 to 23 percent from the same period last year, while revenue for the year would double from 2000, when the company reported $1.1bn (£720m).
The slowdown stems from falling demand from network equipment manufacturers, which are delaying and cancelling orders for Broadcom chips due to slowing demand for their own parts, he said.
Broadcom's relationship with computer maker Gateway, however, could also contribute to the problem. Broadcom earlier signed a deal with Gateway that would have led to Gateway incorporating Broadcom's wireless network technology into its PCs, Nicholas said.
A recent management shake-up at Gateway, which led to the replacement of former chief executive Jeff Weitzen and six other high level Gateway executives, could change the outlines of the alliance. "We basically need to sit down with the management team," said Nicholas, who, like a lot of the technology world, didn't anticipate the changes at Gateway. "We pride ourselves on being a company that doesn't surprise the marketplace, but this (the Gateway shake-up) is one where we were surprised."
Nicholas said the decline in revenue is not a result of a breakdown in the company's tight relationship with 3Com. Rumours have swirled recently that 3Com was going to start using chips from other manufacturers for its network cards. "Our business with 3Com is as strong as it has ever been," Nicholas maintained.
Nicholas said the slowdown would not impact Broadcom's aggressive acquisition strategy or hiring practices.
Although he warned of slowing sales, Nicholas declined to peg the exact extent of the decline. "Right now, we're not ready to identify how much less growth," he said.
Broadcom chief financial officer Bill Ruehle added that the company expects orders to pick up in the second half.
News.com's Sam Ames contributed to this story.
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