Broadcom Shares Surge 3.56% Amid Signs of Chip Recovery and Strategic Diversification
1min read Recently, Broadcom (AVGO) saw its shares rise by 3.56% on September 19, as the company announced that signs of recovery are beginning to emerge in its core chip business. However, the company remains cautious about fully rebounding from the economic slowdown. The California-based semiconductor giant has faced challenges due to the US-China trade conflict but is seeing stabilization in its semiconductor solutions demand, according to CEO Hock Tan.
The trade conflict, particularly sanctions on Huawei, has significantly impacted Broadcom. Last year, the company’s sales to Huawei amounted to approximately $900 million, accounting for a substantial portion of its overall $208 billion revenue, with exports to China making up over 50% of Broadcom's total income. Despite these challenges, Broadcom did not revise its 2019 revenue forecast downward from its previously reduced estimate of $225 billion.
In response to these market conditions, Broadcom has been diversifying its business beyond chip sales by acquiring software companies. For instance, it acquired CA Technologies for $18.9 billion in 2018 and is in the process of acquiring Symantec's enterprise security unit for $10.7 billion. This strategic pivot aims to boost software revenue to 30% of total income.
Broadcom reported that its third-quarter infrastructure software sales reached $1.1 billion, and it anticipates total software revenue of $5 billion for the fiscal year. The ongoing US-China trade dispute adds uncertainty to the chip industry, with Tan acknowledging the low visibility for future growth, despite a potential rapid recovery.