Avago Technologies Q1 Results Top Estimates, To Buy Emulex In $609 Mln Deal

(RTTNews) - Analog semiconductor devices maker Avago Technologies, Ltd. (AVGO) reported Wednesday a profit for the second quarter that soared from last year, reflecting improved gross margins and triple-digit revenue growth.

Both adjusted earnings per share and adjusted quarterly revenues topped analysts' expectations. The company also provided sequential revenue growth guidance for the second quarter.

"We had a strong start to our fiscal year with better than expected 3 percent sequential revenue growth in the first quarter, driven by our wireless revenues, which grew by 90 percent from the same quarter last year. And we continued to deliver very strong financial results with greater than 40 percent operating margins and $2.09 in EPS," President and CEO Hock Tan said in a statement.

The Singapore-based chipmaker reported net income of $351 million or $1.26 per share for the first quarter, sharply higher than $134 million or $0.53 per share in the prior-year quarter.

Income from continuing operations for the quarter surged to $338 million or $1.22 per share from $134 million or $0.53 per share last year.

Excluding items, adjusted net income from continuing operations for the quarter was $596 million or $2.09 per share, compared to $217 million or $0.84 per share in the year-ago quarter.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $1.94 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter soared 131 percent to $1.64 billion from $709 million last year, and adjusted revenues were $1.66 billion, and topped twenty-two Wall Street analysts' consensus estimate of $1.64 billion.

Wireless Communications revenues, which makes up about 41 percent of total revenues, surged 90 percent to $664 million from last year.

Gross margin for the quarter improved 300 basis points to 51.0 percent from last year's 48.0 percent.

Looking ahead to the second quarter, the company expects revenue to be between flat and down 4 percent, and adjusted revenue between down 3 percent and up 1 percent, both sequentially. Street is currently looking for revenues of $1.54 billion.

Separately, Avago Technologies agreed to acquire networking company Emulex Corp. (ELX) for $8 per share in an all-cash deal valued at about $609 million. The deal is expected to close in the second half of Avago's fiscal year ending November 1, 2015.

"Emulex's connectivity business fits very well with Avago's existing portfolio serving the enterprise storage end market. We are excited to welcome the Emulex team to Avago," Tan stated.

Avago expects to fund the deal with cash available on its balance sheet. Upon closing, Emulex will operate as a business unit within Avago's enterprise storage segment, and is expected to be immediately accretive to Avago's adjusted earnings per share.

AVGO closed Wednesday's regular trading session at $112.58, down $0.50 or 0.44% on a volume of 3.12 million shares. However, the stock gained $6.13 or 5.44% in after-hours trading.

ELX closed at $6.36, up $0.03 or 0.47% on a volume of 0.57 million shares. The stock soared a further $1.56 or 24.53% in after-hours trading.