AVGO Broadcom Inc

By Maria Armental 

Chip maker Broadcom Inc. on Thursday pulled its financial projections for the year, citing uncertainty around the coronavirus pandemic, and said it would push debt payments to the second half of the year or earlier if conditions improve.

The company, based in California, had projected about $25 billion in revenue for the year that ends Nov. 1 and pledged to pay down about $4 billion in debt.

Instead, Broadcom offered a revenue forecast for the current quarter, saying that with clear visibility of where business stood, it expected revenue to come in at about $5.7 billion. That, however, fell short of analysts' projected $5.94 billion, according to FactSet.

Broadcom shares closed down 11% for the day at $218.78, and fell 9% to $200 in after-hours trading.

Apple Inc., Broadcom's largest customer accounting for roughly 20% of Broadcom's revenue last year, warned last month that it would likely fall short of quarterly revenue projections due to the coronavirus outbreak.

Wireless products, Chief Executive Hock Tan said in an earnings call, were down sharply from a year earlier.

But the company, which fueled speculation of a possible sale of the wireless business after saying in December that it considered wireless as one of several noncore businesses and "more financial assets, especially in terms of capital allocation," on Thursday said it had decided to keep the operations.

Mr. Tan pointed to the supply agreements to provide wireless components for Apple products through 2023. Broadcom estimated the agreements, in addition to an agreement last year to supply Apple with radio-frequency units, would generate about $15 billion in revenue.

On Thursday, Broadcom reported a 19% drop in first-quarter profit, before dividends on preferred stock, to $385 million, or 74 cents a share. On an adjusted basis, which excludes costs tied to acquisitions and other items, profit fell to $5.25 a share from $5.55 a share a year earlier.

Meanwhile, revenue from continuing operations rose to $5.86 billion from $5.79 billion a year earlier.

Analysts surveyed by FactSet expected a profit of $1.42 a share, or $5.33 a share on an adjusted basis, and roughly $6 billion in revenue.

Broadcom's semiconductor business, which accounts for the bulk of revenue and has weighed on results in recent quarters, fell 4% from a year earlier but was partially offset by a 19% revenue growth in the infrastructure software segment.

Mr. Tan had said the core semiconductor business would return to growth in the second half of the year, following the latest cyclical downturn, and that Broadcom would also benefit from its recent acquisition of Symantec's enterprise business.

On Thursday, Mr. Tan said in a conference call with analysts that the semiconductor business has been improving and that he hadn't seen any material impact in the most recent quarter from the spreading coronavirus.

"But frankly, visibility is bad, and confidence continues to erode. So as a result, we believe it is only prudent that we withdraw our annual guidance until such time that visibility returns to pre-Covid-19 levels, " Mr. Tan said, referring to the disease caused by the virus.

Chief Financial Officer Tom Krause said in a statement that Broadcom was "well positioned to continue to support our dividends to stockholders despite the challenging market backdrop."

"Things would have to get a lot worse where we'd be looking at changing our dividend policy," he said in the call. But "M&A is off the table until visibility improves," he said.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

March 12, 2020 19:52 ET (23:52 GMT)

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