4 Things Broadcom Corporations Management Wants You to Know

By Markets Fool.com

Shares of Broadcom have performed quite well over the last year, delivering capital gains to the tune of 48.3% in that time. The company's financial model seems to be much stronger following its exit from the cellular baseband business, with its connectivity, broadband, and infrastructure and networking businesses continuing to perform well.

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During the company's most recent earnings call, company executives had a lot of things to say that should interest all Broadcom shareholders and potential shareholders. I've picked four of my favorite insights from the call to share here.

No. 1: Connectivity is doing much better than expected
When Broadcom announced last year that it would shutter its cellular baseband business, company executives said that this put approximately $500 million to $800 million worth of low-end connectivity chip business at risk.

The idea here is that whenever Broadcom sold a baseband solution, it sold along with it a connectivity chip. Broadcom also partners with low-end and mid-range baseband vendors to include the former's connectivity chips along with the baseband vendors' applications processor and baseband platforms.

According to Broadcom CEO Scott McGregor, Broadcom didn't see this happen. In fact, he said that Broadcom is "gaining share in that segment [of the connectivity market]." This, McGregor says, is due to the fact that Broadcom's partners here are "actually gaining share" relative to non-Broadcom baseband partners.

No. 2: Broadcom isn't sweating foreign exchange rates
A number of companies have talked about the foreign exchange headwinds that are impacting their businesses. When asked about the potential impact of foreign exchange on Broadcom's business, McGregor said that Broadcom management isn't seeing and doesn't expect to see "much impact."

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This, he says, is due to the fact that Broadcom prices all of its products in dollars. McGregor did note, though, that because the company has non-U.S. operations that there might be some foreign exchange impact on operating expenses.

From a product pricing perspective, though, McGregor was clear that the company is "just not seeing [foreign exchange] as a factor."

No. 3: New technology in connectivity offsetting price erosion
During the call, analyst Joe Moore asked Broadcom's management about its view of "Wi-Fi centric [average selling prices]."

McGregor says that this year, the company has "a lot of opportunity to offset the normal [average selling price]" pressure as a result of "migration to new technology."

One example of such "new technology" that he gave was RSDB support present in the company's latest BCM4359 802.11ac connectivity chip. RSDB, which stands for "Real Simultaneous Dual Band," reportedly allows Broadcom's new chip to "transmit and receive over two bands simultaneously."

McGregor also highlighted the company's relatively new sensor hub and GPS combination chip. The chip has been deployed in the Galaxy S6 (per SamMobile), and McGregor seemed optimistic that the company could tempt other smartphone vendors to use the chip.

No. 4: Switch programmability and "false dilemmas"
According to McGregor, Cavium Networks is saying that its latest switch chip is programmable while Broadcom's chips aren't.

Cavium says on the product page for its CNX80xx family of Ethernet switches that its chips can be "updated by software" to add support for new networking protocols. Cavium says that its switches are the first to have the level of programmability that it describes.

McGregor argues that his company's switches are "programmable to the extent that [Broadcom's] customers need." He also cautioned that a high degree of programmability isn't without trade-offs:

Programmability means it takes longer to get to market because you got more work to do, it means that it can have slower performance versus hardware assist. There are a lot of trade-offs here, so it's a really complicated equation.

McGregor did urge investors to "rest assured" that all of Broadcom's products are indeed programmable and that Broadcom is well equipped to deliver what the market needs.

"I think there's a little bit of a false dilemma being painted in the market there," McGregor concluded.

The article 4 Things Broadcom Corporations Management Wants You to Know originally appeared on Fool.com.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.