Investopedia: Avago Trumps The Cycle

Semiconductors have not been doing well as a group lately, but that does not mean there isn't room for companies with better mousetraps to gain share. As one of those analog chip companies with a better mousetrap, Avago Technologies (Nasdaq:AVGO) is standing out not only for its relatively better stock performance, but also its stronger relative underlying financial performance. 


Fiscal Second Quarter Results Show Ongoing Growth
Semiconductor companies have hit an air pocket lately in terms of their growth momentum, but Avago is still growing its business. Revenue rose almost 9% from the same quarter last year and about 2% on a sequential basis, fueled in large part by better results in the wireline business. The wired business saw revenue grow 5% sequentially (and 30% year-on-year), while the industrial/auto business saw 1% sequential revenue growth. Wireless revenue was flat and the company's consumer/computing business was up 3% (though down 38% from last year and a small part of the overall business). (For more, see A Primer On Investing In The Tech Industry.)

Like most tech companies, Avago levered better revenue into stronger profits. Gross margin (GAAP) slipped about 20 basis points on a sequential comparison, but rose nearly four full points from last year. Operating income was a bit more mixed - GAAP operating profits rose 28% from last year (and the margin expanded), but contracted 3% on a sequential basis in large part because of higher SG&A expense (and higher stock option expense within that).


To read the full piece, please continue below (via the link):
http://stocks.investopedia.com/stock-analysis/2011/Avago-Trumps-The-Cycle-AVGO-IBM-VZ-AAPL-S-BRCM-QCOM0531.aspx