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Avago Technologies Ltd. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: June 8, 2012 04:21PM

Avago Technologies Ltd. (AVGO) filed Quarterly Report for the period ended 2012-04-29. Avago Technolog has a market cap of $7.56 billion; its shares were traded at around $33.82 with a P/E ratio of 12.2 and P/S ratio of 3.2. The dividend yield of Avago Technolog stocks is 1.7%.



Highlight of Business Operations:

Net revenue. Net revenue was $577 million for the fiscal quarter ended April 29, 2012, compared to $560 million for the fiscal quarter ended May 1, 2011, an increase of $17 million or 3%. Net revenue was $1,140 million for the two fiscal quarters ended April 29, 2012, compared to $1,110 million for the two fiscal quarters ended May 1, 2011, an increase of $30 million or 3%. The increase in net revenue was primarily due to strength in the wireless communication target markets, largely offset by weakness in our industrial target market.

Gross margin. Gross margin was $278 million for the fiscal quarter ended April 29, 2012 compared to $275 million for the fiscal quarter ended May 1, 2011, a slight increase of $3 million. Gross margin was $548 million for the two fiscal quarters ended April 29, 2012 compared to $546 million for the two fiscal quarters ended May 1, 2011, a slight increase of $2 million. As a percentage of net revenue, gross margin decreased slightly to 48% for each of the fiscal quarter and two quarters ended April 29, 2012 from 49% for each of the fiscal quarter and two quarters ended May 1, 2011.

The increases in gross margin dollars were primarily due to (i) an increase of $14 million and $23 million in revenue from development agreements and sales and licensing of intellectual property in the fiscal quarter and two fiscal quarters ended April 29, 2012, respectively, (ii) a $2 million and $5 million decrease in depreciation expense during the fiscal quarter and two fiscal quarters ended April 29, 2012, respectively, resulting from a change in the duration of the useful lives of certain of our manufacturing equipment which occurred in the fourth quarter of fiscal year 2011, and (iii) a $3 million and $6 million decrease in cost of products sold due to a revision in cost allocation methodology during the fiscal quarter and two fiscal quarters ended April 29, 2012, respectively, in each case when compared to the corresponding periods in fiscal year 2011. However, these increases were primarily offset by a less profitable product mix, with a higher proportion of sales into our wireless communication target market compared to sales into our higher-margin industrial and automotive electronics target market, in the fiscal quarter and two fiscal quarters ended April 29, 2012. As discussed above, during the fiscal quarter ended January 29, 2012, we revised our cost allocation methodology to fully burden with overhead costs the expense for wafers used in research and development projects that are processed through our internal fabrication facilities, or R&D wafer cost allocation methodology.

Research and development expense was $166 million for the two fiscal quarters ended April 29, 2012, compared to $149 million for the two fiscal quarters ended May 1, 2011, an increase of $17 million or 11%. As a percentage of net revenue, research and development expenses increased slightly to 14% for the two fiscal quarters ended April 29, 2012, compared to 13% for the two fiscal quarters ended May 1, 2011. The majority of this increase, in absolute dollars, resulted from investments in our wired infrastructure and wireless communications solutions. Part of the increase was attributable to a $8 million increase in research and development project consumables and services, $6 million of which was due to the change in R&D wafer cost allocation methodology, as discussed above under Gross margin, which increased gross margin by a corresponding amount. The increase in research and development expense was also attributable to a $5 million increase in depreciation expense related to capital expenditures supporting research and development efforts and a $3 million increase in share-based compensation expense attributable to grants of share-based awards at higher fair market values and to our ESPP, partially offset by a $1 million decrease in accrued incentive compensation expense compared to the two fiscal quarters ended May 1, 2011. The overall increase in research and development expense is net of $4 million in accrued reimbursements pursuant to research and development grants.

Selling, general and administrative. Selling, general and administrative expense was $51 million for the fiscal quarter ended April 29, 2012, compared to $55 million for the fiscal quarter ended May 1, 2011, a decrease of $4 million or 7%. As a percentage of net revenue, selling, general and administrative expense decreased slightly to 9% from 10% for the fiscal quarter ended May 1, 2011. Changes in components of selling, general and administrative expense for the fiscal quarter ended April 29, 2012 consisted of a $2 million decrease in legal expenses related to offensive litigation matters, a $2 million decrease in accrued incentive compensation expense and a $1 million decrease in depreciation expense, partially offset by a $1 million increase in share-based compensation expense attributable to grants of share-based awards at higher fair market values and to our ESPP and a $1 million increase in foreign currency transaction losses from hedged transactions, compared to the fiscal quarter ended May 1, 2011.

Read the The complete Report



Stocks Discussed: AVGO,
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