LOS ANGELES (AP) — Shares of Broadcom Corp. fell Wednesday, a day after the communications chip maker gave a disappointing revenue outlook for the fourth quarter. Also weighing on the stock: Apple Inc.'s decision not to include a new wireless computer networking standard in its latest iPad model.
THE SPARK: Broadcom reported on Tuesday that its profit jumped 44 percent in the third quarter, aided by lower operating costs and a one-time gain related to a settlement. The company's adjusted results exceeded Wall Street expectations, but the company's fourth-quarter revenue guidance that fell short of Wall Street's expectations.
Also on Tuesday, Apple announced a thinner, lighter and faster-running tablet computer called the iPad Air. But the iPad will not include an upgrade to the next-generation new Wi-Fi standard, which could have represented a new opportunity for sales for Broadcom.
THE BIG PICTURE: Irvine, Calif.-based Broadcom makes chips for cellphones and other devices such as cable set-top boxes. Strong growth in smartphones and wireless Internet usage has helped lift the company's prospects.
THE ANALYSIS: In a research note Wednesday, Susquehanna Financial Group analysts Chris Caso and Liz Pate noted that the main factors in the disappointing fourth-quarter guidance were Apple's decision to stay with the 802.11n wireless networking standard, rather than next-generation standard, 802.11ac.
Apple also stuck with the older wireless standard on its iPhone 5s, which debuted a month ago. As a result, there was no content bump for Broadcom, the analysts noted.
Still, the analysts remained positive on Broadcom's performance outlook next year, which should include an increase in sales from an iPhone 6 release, among other factors. As a result, the analysts maintained a "Positive" rating on the stock and a $35 price target on the shares.
In a separate note, Stifel, Nicolaus & Co. analysts Kevin Cassidy and Dean Grumlose said they expect an increasingly competitive smartphone market next year for wireless connectivity products.
"In our view, Broadcom needs to move the market to 5G Wi-Fi to maintain its connectivity leadership," the analysts wrote. They maintained a "Buy" rating on the stock, but lowered their 2014 full-year price target on the shares to $30 from $36.
STOCK ACTION: Shares were down $1.32, or 4.8 percent, to $25.82 in afternoon trading. The stock is down 22 percent this year.