Chipmaker Avago Technologies (AVGO, Financial), along with peers like Skyworks Solutions (SWKS, Financial) and Qorvo (QRVO, Financial), has benefited from the overwhelming success of Apple’s (AAPL, Financial) iPhone 6. The company recorded stunning numbers in the latest reported quarter, and consequently, the stock is up 30% in 2015.
In Q1 FY15, the company reported earnings per share of $1.99, beating the analyst estimate of $1.78. Revenue was $1.66 billion, a rise of 3% versus the previous year’s same quarter.
Revenue for company’s wireless division grew 6% successively and wireless represented 40% of company’s total revenue from continuing operations. As compared to last quarter, wireless revenue grew 90%. Wired revenue represents 21% of company’s total revenue from continuing operations.
The company may depend largely on Apple; however, the company is branching out its revenue streams and that makes it a good stock for investors to buy. Although Apple is still a big growth driver for Avago, the company also has several other plans to boost growth. Let’s take a look at those initiatives.
Switching to PEX9700
To come across the requirements of hyperscale and data-intensive applications, data centers need to manage prices and power consumption while exploiting performance. While PCIe is the ubiquitous interconnect for internal devices, external device connectivity characteristically involves using other architectures. This trashes power, decreases performance, and raises costs. To exclude this waste, Avago offers the next generation of switches presenting the industry leading PEX9700 series to directly attach in-rack devices by means of PCIe. Devices within a hyperscale system, NVMe enclosure, and rack-scale-based subsystems can now communicate straight through the same high-performance PCIe fabric, turning those devices into a single high-performance, high-capacity compute system.
The PEX9700 series of switches propose numerous significant new switching features including:
- Shared I/O
- Tunneled Windows Connection
- Embedded DMA Engines
- Flexible Port Configuration
- Downstream Port Containment
- Dedicated Port Management
Emulex acquisition
Acquisitions have been Avago’s preferred track to accomplish growth, and the wireless chipmaker is constantly on the lookout for prospective targets as it pursues to project into new markets.
Emulex’s connectivity business line up well with Avago’s current collection and will be vigorous for increasing its enterprise storage business. Also, it will powerfully pair Avago’s offerings and abilities, and lift its policy to maintain next-generation server and storage architectures.
The company believes that the acquisition will increase its growth projections and be proximately accretive to earnings. Investors have reacted positively to the deal, as shares of both the companies have been on a robust path.
Conclusion
There’s no doubt that Avago will continue to benefit from the soaring sales of Apple’s iPhone 6 and iPhone 6 Plus. However, that’s not the only tailwind as the chipmaker has expanded its revenue streams and should continue moving higher in the future. The company’s acquisition of Emulex will enhance its bottom-line while it also has big opportunities in the 4G market, making it a good buy at present valuations.
