AVGO - Earnings call transcript Q2 2018

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Operator

Welcome to Broadcom Limited’s Second Quarter Fiscal Year 2018 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Ashish Saran, Director of Investor Relations. Please go ahead, sir.

Ashish Saran

Thank you, operator, and good afternoon, everyone.

Joining me today are Hock Tan, President and CEO; and Tom Krause, Chief Financial Officer of Broadcom. Broadcom financial press quarter performance year today, tables and of closed XXXX. our describing for market distributed release a financial fiscal After the second

of information copy, did for at website one website telephone also recording conference our webcast will may receive will you being This Investors be a week. is the and If obtain of It not www.broadcom.com. Investors the broadcom.com. archived playback live from call Broadcom’s be the section via section you at in a available

prepared comments will some results, and of the fiscal our section During quarter Hock of XXXX, XXXX and be second commentary this regarding Tom guidance year of third year call, for the our providing business details fiscal quarter environment.

of comments. end We our prepared will take after questions the

call. forward-looking I information to made and the Hock to press for the differ SEC actual U.S. today’s factors certain included In made the from release. non-GAAP to and GAAP on a over between reports cause specific Please filings results. would risk materially like to A the is with to today our that this during results our non-GAAP time, our call recent measures primarily reporting, on refer attached measures could press Broadcom basis. tables refer financial reconciliation release to GAAP will non-GAAP At Comments call on financial this today’s our statements turn the addition Tan. in to Hock?

Hock Tan

achievements And on we business period than midpoint program. XX.X% strong demonstration and $X.XX quarter and to cash do Consolidated was billion us in revenue continued were above active. margin XXXX. second we of wireless shares. X, to to gross Ashish, and wired billion, you, continue revenue. quite repurchasing everyone. X.X announced We am active recently stockholders returned more We fiscal the by to of a also All to a results enterprise our of execution our stock offsetting announcement executing revenue. over flow XXXX, just XX.X%, Thank afternoon, June in be of our free EBITDA robust record repurchase with XX.X% to I and approximately million quarter model. for pleased Since very storage good second with net through the guidance six-week have $X.X for intend weaker the drove

billion, while you As quarter, Segment into give was the quarter. before XXXX go quarter quarter, the by XX-week revenue. comparisons QX total fiscal quarter, and more of quarter, segment. a this reminder, the reflect wired second performance XX% I represented In a revenue second sequentially. wired. was Starting a wired color prior revenue XX-week was year-on-year, this I XX% our as with of discuss The $X.X growing segment X%

seasonal centers a Second cloud quarter in strong recovery demand from sequential wired data increase in and broadband access. reflected results

driven robust centers strong and was growth spending by networking growth in by increase in and IT. year-on-year compute offloading Solid cloud data enterprise

service the an benefited also We markets and remained China in by on from sluggish. spending optical access on video broadband In expansion providers. contrast, capacity in spending however, increase

in growth wired side ZTE. the on to the to ban revenue shipments fiscal expect continue, third we quarter to Turning ‘XX, notwithstanding

We access robust. remains expect from cloud demand to data enterprise centers remain IT, while and healthy broadband

but second segment In total quarter, declining revenue Moving billion, was revenue. XX% wireless XX% growing our sequentially. the wireless. of X.XX on to year-on-year represented wireless The XX%

to product smartphone did than increase decline We quarter. smartphone sharply as usual typically in North product exaggerated Second to reduced new Korean they launch. quarter offset this large sequential deeper shipments customers American shipments customer their from wireless our our decline revenue as a was partially from first supported

their ramp next from start as half American transition beginning seasonal smartphone to we second quarter, our they third large to Looking customer the expect of ahead to see North in demand generation to platform.

I -- Korean mean recovery a expect to we a decline customer. to this to large offset strength recovery in say, However, by shipments be this

flat, to slightly a declining overall revenue our for on maybe even wireless a quarter. expecting we result, the are third As be sequential basis

enterprise Let me now to turn storage.

was our included revenue a storage total million Channel and billion enterprise of XXXX of over XX% course from recently This of acquired $X.XX revenue. represented full of business. contributions quarter switch Brocade the Fiber Second $XXX quarter

we disk you XX% our contribution, Brocade reported, hard as server would revenue recall, from have shown of growth year-on-year year-on-year we demand But enterprise As have market. of in and by segment quarter XXXX. this from early second with exclude softer revenue strong stable partially XX% may storage storage grew offset performance And completed storage business quarter drive acquisition and the enterprise sequentially. first fiscal enterprise if markets,

broad For revenue sector. by strength sequential IT from growth the overall second the enterprise quarter, driven was the

to we in Looking fiscal growth spend to capacity IT drive recovery demand. enterprise storage, sequential XXXX, will to in ahead expect quarter growth in storage drive lead in hard third continued disk and cloud enterprise a

momentum year-on-year strength annual growth however revenue expect third the continue the quarter, strong XX% year-on-year, revenue growth. range segment single industrial digit was be segment mid XX% very to this revenue. second $XXX sequentially. with the industrial In growing million, a long-term we Finally, expect our The X% represented to of continued into today, And we on X% our in basis. industrial. remain to the industrial quarter. Notwithstanding last total segment, Resales

our stable. robust So, in overall summary, and business remains

of XXXX we storage, robust enterprise outlook very for revenue consolidated environment. our growth center billion high from Brocade, benefitting fiscal digits. quarter, we has the Year-on-year, organic third strength digits. for IT spending long-term our $X.XX growth to and wired reflects midpoint, would growth continued modulate remained And single this experience quarter second focus organic and foresee data been revenue cloud with this year-on-year have the a the the revenue towards mid at quarter of the in in very enterprise single without third as sustainable. Even Our from target contributions revenue

business. flow consistent our on We to from increasing will continue focus keep and free margins a improving cash

with be billion the second strong continues sheet over at quarter. of cash balance in the $X Our end

as fiscal on continue authorization June And our repurchase plan $XX.X balance XXXX, expect as we the aggressively that let cash returns have review for Xst. repurchase believe generate of turn call our detailed to that, quarter me to financials flow as stock strong doing we superior during a shares also the more second reflecting to can long third Tom outlook. of of we generation, very With our so. free billion over we quarter the and in We remaining

Tom Krause

and our good My non-GAAP Thank website earnings of specifically our today noted. also available on included in afternoon, you, everyone. Hock, and is from today GAAP at data operations, reconciliation will results unless the primarily non-GAAP continuing release focus and broadcom.com. on A otherwise comments our is issued

our the summarize of quickly me second Let fiscal results for quarter XXXX.

Second $X.XX billion, in quarter line guidance. net revenue with was

above than EBITDA and lower of for was Our from than represented segment. expected from revenue. second a wired the was the for of $X.XX and did XX.X% continuing by quarter expected XX.X%, benefit from of from our segment revenue billion basis midpoint the XX operations Operating gross operations favorable margin points was guidance. $X.XX revenue more driven product Adjusted income revenue. higher and wireless mix XX.X% our We quarter billion from the continuing quarter, in quarter represented

as XX we a the prior days, X-day the Our days increase were quarter. across sales quarter revenue linearity saw of outstanding reduction in from

on XX not quarter quarter $XXX generated we Brocade. the including from hand Qualcomm prior the the third billion of also the We and at remained and flow, related quarter million end a cash did of of Capital quarter. X.X% Our cash biannual from in a on billion, the second the quarters second flat in $X.XX that million of second are in expanded impact inventory Days quarter year. Please or $XXX restructuring made first prior make days. decrease our operational these which the net $XX of note on the at reflected was revenue. fiscal basis in $X.XX was acquisition interest of payments activities any expenditure and as million

matter, would the reflects housekeeping $X.XX than note less in quarter, also operating that cash I CapEx expenses. million depreciation. a XX.X% flow impact flow, the define CapEx, and higher or of second acquisition was cash and net billion revenue $XX as of which Free was restructuring As

buyback, repurchases million spent repurchasing quarter, weeks you the the two last On second In on we the These over million quarter. X.X clarity. to place give the some just took of shares. more $XXX

we first the the an spent weeks X.X four of quarter, additional third have $X.XX Over shares. billion, million repurchasing

million the of returned in distributions second dividends quarter. form $XXX addition, the we and in In

cash Turning total and ended to $XX.X our quarter balance in in $X.X cash with balance by sheet. our We second billion billion increased billion the $X.X debt. period the through and

guidance. expenses will X, it any forecasted conditions Now, $X.XX be Stock-based $XXX is continuing guidance other shares expense only. guidance from of million be X does count expense share $XXX plus expected XXX is approximately is to fiscal results to is million. or to tax million. minus for year million. X%. to done be update be of The for are margin let provision billion, approximately or million. approximately This be assessment our XX.X%, This turn non-GAAP the from is not forecast and after compensation to million. repurchases to $XXX be and Gross reflects to third $XX intend will and approximately current operations XXXX. this do not expected point. we XXXX. diluted quarter The CapEx share June percentage business revenue guidance plus impact me estimated Net interest approximately include is $XXX Net Operating be expected minus our for the

reform, with of United rate States steady the range effects in on to tax corporate a As expected per cash result to the in we state of effective basis redomiciling tax the connection you our XX% U.S. had initially recall, be year. of the as may X% and a

balance rate That cash for X% my and open ‘XX please call Following cash to our XX% remain up year the for long-term concludes approximately prepared tax to remarks. X% expect of questions. range. rate currently redomiciliation, Operator, we tax the the fiscal to in be our a

Operator

with Our question Ross first Bank. from Seymore Instructions] [Operator Deutsche comes

Your line now is open.

Ross Seymore

off year last a to in quarter? guided Hi, the wired quarter Talk slowed there for for so segment? was the I growth that guys. you to the And digit you about about visibility third confident that you’re growth on sequential in growth and fiscal lot bit the few What’s side, fiscal Thanks little want have and I slight the can hit the start why year-over-year delivered. still wired guiding debate that questions. single forward. mid of just going you growth much a lot, the driving a

Hock Tan

it us, the networking segment wired that especially and it’s in prepared as largely cloud The of from indicated big visibility my we data I for part good center very guys guys, those the we have the call see, now driven, spending. right at the patterns IT That’s cloud spending also strong have traditional very data been enterprise. I is less also environment, and enterprise. visible, enterprise center -- What guys. that’s probably that remarks, more

as you very enterprise with describe our So, And portion dropped to relates combine as networking as that. it, aside, call separate it that because the strong. two we of is course, when an together, of it wired we get infrastructure a segment, benefits storage, along broadly

very I many what -- in business lumpy storage So manner. center because business, what situations tend very lumpy in many, manner data that’s And call see of the guys cloud fairly spend very strong we a both storage, many to center them. line data in I of near in or -- strong, in the why call that’s visible very,

that to the enterprise guys are more secular get you so, And manner as or opposed doing. trended IT a as visibility

hit drive will for to So, digit answer that to bottom-line, our our to goal year. single wired year-on-year of question, this business mid your

Ross Seymore

and as Then, of just many starting business think to so things. big talk as the on American I that Can my there stabilized. content half side or your about to that that you business parts follow-up, switching and different how in whether see side, North the the of unit the customers It’s is doing? the wireless guess, of a via moving up are about seasonality per year, SKU gears content given to whole good back you has different what turn are Perfect.

Hock Tan

and -- on are all moving look a that. whole factors total to basis it lot whole there’s happen which It’s in also a unusual of [ph] at would basis and easier There parts. thought on we

said and a I pattern bookings customers. we see is the in clearly we coming of that we And year to this now, and the North strength. to all from the that iPhone is. But generation level orders having of seeing caution end close seasonal that, are call builds, As some normal we to of iPhone there way in from believe in do see there also move X out is, what that do we there these X coming very calendar American extend

is, you So, normal to generation what The uncertainty -- trend to much patterns. new difference content might we the the some that’s versus might not phones mix And hard phones frankly, how be. what of will versus see what of phones. -- predict the the that of legacy to that mix as exactly, changes clear. is lead generation back what’s visibility Because very said of be. legacy -- or what phones generation would new And it’s increases level --

Operator

And next you. our comes Hettenbach Stanley. Thank with Craig question from Morgan

Your line now open. is

Craig Hettenbach

Yes. Thank you. strategic a Hock, more question view you business. how of just of the

that M&A. the that been a feeling do of is some the need acquisitive So, pushback that you’ve so company more is on to there

would see you the part to do And return that. can back view opportunities with few cash now you just business, the buying you’re talk the Number things on then stock, M&A So, your growth up buybacks? through versus make second be, current of as of about long-term that one, it? profile the the

Hock Tan

question. interesting Very

of growth you we Year-to-year, Company see The will variations change. see saw to we’re no say No achieve makes -- seeing, of demonstrate rate our that double to of basis, it. otherwise. saw continues that think business business In terms compounded period that and we that long-term to that XXXX And We acquisition, to and do We mid-single XXXX. all mid-teens look year-on-year as growth may change for you rate, as the growth mid there the entire growth from long-term as at reasons digit. franchise and compared -- digits. of that mid-single long-term always not growth time an model digit from stripping us period out us anything extended are contributions this ‘XX. it a organic a said taking are businesses We acquisitions. strong to close -- we over compounded of average various to in there have saw comprise to be that reason on average Company,

one in that Because and I expect ‘XX it’s single mid-teen continue. but still digits, as rate it’s year, We’re definitely. growth don’t ‘XX to said, in of above mid I

be digit to be it that’s We down expect high perhaps that, to expected. And but to conservatively. expect moderate, single

is business keep You franchise connectivity cannot expect largely position our in kind I semiconductor higher the market closer the growth especially said not markets of rate the than our where industry, industry. entire connectivity products solutions has level, of which it of prevail. to the within a before as those breadth -- positions solutions, modulate of To There to counting growing major to and down, memories. always, of is the in growth

We have think longer whole X contest. cycle XX life which we which is maybe this product which in new varies it industrial storage, from business, every and an even every be time technology to new thing is the months may X, handsets, pops to increased brings to variation that to as years,. generation follow each like that. -- simply a generation all that generation only And that up through new

to So, worldwide digits I pica that global we with a that. growth [ph] a above -- on end Hence, will want say And mid single a long-term. we on up we have see rate, GDP basis.

as in single over period, we we it we’re we to seeing Even inevitably it and get mid ‘XX. measure the variations -- digit. short-term, in enough it that But saw see the down in in long will ‘XX,

Craig Hettenbach

question evaluating on steps that of aggressive buyback? around of opportunities part kind the versus the M&A second a as taking just then, And how you’re you’re

Hock Tan

We as could on generate on we we as do based do both, return cash. basically investment

generation, is of as is and last and quarter our last -- Tom remarks his an quarter are cash in this seeing unusual the One quarter. not we indicated flow especially things

very generation is very, going forward, strong. our focus we cash flow As

are couple $X flow towards reduction reduction, that it much as big over in building quarter. amount prior two consumption north cost CapEx but in dropped last free of reduction flow purposes, involves of And part are of of allocations as big Our a in capacity which cost a billion finished level relates worldwide, and money, years, said, prior to big we quarters. CapEx least, the And -- dramatically between campuses those we at cash up building than years, been seeing [indiscernible] fact we the up which was CapEx, cash last looking lower has for Tom nonetheless of programs. operating our cost

fairly cash on So, flow. to of that’s enabling cash north free a be our substantial generation basis, quarterly probably $X billion

billion invest we So that’s good market very producing shares. more in shares, generating cash M&A, a at still and us very our allowing to as think to which on be $X its us in do, flexibility, stream X% return, able own generating a -- fairly lot our cash about is return cash balance a shares -- of over look which still about company, strong allows that strong talking asset, and generation own

will So generating But that we cash. with of of doing especially doing course, that of keep doesn’t we stop the flexibility M&A. mean a lot

We to have and are as those we the and opportunities. on we do, we see And on as cash look go criteria cash by act we opportunities we still return. M&A will continuing

Operator

Shrivastava question next BMO Markets. our comes And from Ambrish Capital from

Your line is now open.

Gabriel Ho

Gabriel question. in Ambrish. is my for This Ho taking calling Thanks for

Hock. this for I think, question is

on to On third year-over-year terms a of quarter. the basis fiscal the a be guidance growth wireless, implying for seems in the flattish

later the your understanding -- is, large smartphone customer phone my last than year, was So, at normal. OEM

of to why So, not and growing is units? the revenue content is wireless it more or the due

Hock Tan

we North Korean to I maker was going last maker it various clear. in same quarter-on-quarter the reasons. third smartphone hard remarks, time year the and measure this direction. my phone had the quarter, American high-end for very It’s At In both

phone strength as American I my we not the North We’re difference. that phone not maker. we seeing are in positive seeing -- difference, still that’s reason remarks, said the that Korean the reason very major are -- prepared we’re seeing in maker, while on That’s the we are

Gabriel Ho

Thanks.

As a follow-up.

about how about single we gross side, the and operating OpEx think On growth margin, mid revenue leverage, front you should as about well talk towards revenue your talk digit, longer moderating term? as

Tom Krause

if question and going talking the understood So, operating your you’re correctly, model forward. leverage I

lot at ‘XX, much. from expenses, look a I they’ve fair don’t here from a of at them as to we operating still out the see leverage a might expect think, think you bit, come see down level, -- We if we into look effectively we increasing especially flattened standpoint. obviously margin gross levels. have here this We but these

We last several you’ve the time margins don’t We any continue the years. trend that seen gross see expand; over soon. that’s to see stopping

put together, So, a when that got as a company, when fundamentals. is a that this at Hock you look coming our largely of to continue company we to operating CapEx talked margins. lot believe we’ve mean, capacity CapEx-light And I down. the about, you fabulous is improve

we’re X% more like CapEx be to a quarter, you million revenue. so, suggests to are as much percentage to driving And $XXX running spend a closer of going which

And obviously target we if so, of math. continue margins, we XX% to north you do a of improve that free think have cash which and can improve flow likely XX%, that

Operator

our Barclays. And with from Curtis Blayne next comes you. Thank question

line now is Your open.

Blayne Curtis

ask to to ZTE. up segments the but on like I be want sounded guidance. mention not just I -- make would wanted said the you to all then it sure

be. on much can comment your that share I just at is also And the portion. of was I content, customer, just of portion North if visibility an content; average curious one just secondly but harder legacy just Thanks. wondered customer? to there’s American triangulate obviously your to would then that you it’s on I the wireless, understand, share So, wanted how impact

Hock Tan

that It in to us. Blayne, about of -- which difference no won’t make because to to scheme to big product makes answer. segments, very, want a don’t overall, segments stable might overall talk as of broadly we things, We it scheme things, segments somebody the else, some I our and different up, mean quarter-to-quarter share are on business overall in like but sustainable, down are look mention, some divisions, four XX but very difference I

level. your that I be -- to part first But, again stand a in And regard want really we ZTE, opposition much ship that looking to point. about have said, to -- again, high on we are on we we to this very prefer from trying that’s the we’re not on and don’t at at don’t until share, now is ability as don’t it. to really Where in comment comment out our really like comment to have is shipping. clearly to products terms ZTE, So, this not -- we of out, to it And share. ship

Operator

Thank you.

with Daryanani Our RBC next question comes from Markets. Amit Capital

now line is open. Your

Amit Daryanani

I my Thanks just Yes. as for well. have two taking questions.

capital just allocation. First, on

Now, yield stock, at deals B plan broader essentially that for buybacks M&A bar the cash buy a be part capital your own no become buy does would a integration allocation, of are assuming something X% higher to for your because issues. with

how higher, you curious cash for do option targets does now you on have that I’m today at So, become the or bar the to deals buybacks? cash do look

Tom Krause

I’ll just a maybe think I phenomenon. well, reiterate little Hock driven said basically, it’s it, it But color. returns a bit more

our over the of execution You can back on returns views on stock based buy month plus. buying our last see to back the our own

think I that’s self evident. So,

Hock as integration. M&A think returns double-digit always said, an how look do know forward, to Obviously, drive to standpoint. Going from we we we

to the And back at, the buy as that in our look we’ll excess obviously do the so, it. do a stock that can based But, try on in we we But what mind, given own stock obviously very can is we last long close so, and find the as month we as stock at that. are take we we plus Hock without continue opportunities we’ll of that well said view risk-adjusted think brought to over a returns. take that

Amit Daryanani

a going you’ve fiscal with to you assuming year discussions segment, ‘XX if there? hard fiscal you’re the your about you growth if But, to then, on having aggregate could understand do quarters revenues in two think it. think are follow largest I as flat in be ‘XX of on Got going the you wireless that to the positioned customers next next broader such business, couple be it’s And some level, up this. been of on the grow are in I just wireless at this near-term and show your compares to point that or in

Hock Tan

even quarter, don’t every policy. be change beyond the Because call. not to earnings about practice much a lot And nothing one frankly, that in but give outlook less of a and We’ll franchises thing we’ve including give changed. whole don’t look, largely one strategic segment year And that hasn’t in the in view you on of Again, then year. every comment we’re we’ll We got wireless. -- really especially that. this for those or we doing

Operator

Our Suisse. from with John next comes question Pitzer Credit

Your line is now open.

John Pitzer

some the applications. have differentiate how of Yes. and XG visibility modems guess, question. XG we’ll year. congratulations stack, I’ll quarter. kind have RF the different. coming just the as of this this Thanks other at think of the you the question Good what end your should And at to content your perhaps me with the letting to back strong afternoon, customer, Tom, impact on world see understand far the to transitions But of guys. ask as flagship we time flagship FR for the you that [ph] revenue year, in as of just wondering bit I growth maybe wireless continued around? think And growth mix XG? sort half for Hock, a as might between from ask I the RF initial growth start American little about out North

Hock Tan

call frequency nonetheless, anything, not ultra go in it’s and talk about band which XG, you deeper mean, deeper I X you well, I maybe, or add high ultra XG the what and so, you if high. strategically, the to But beyond. and gigahertz runs go

to proven, well and very push well advance very tend towards You that’s more [ph] more given, known. that’s that’s

because what be likely XG. claimed come truly would come not phones in, really but be will initial they in and to XG, when XG fashion Now, will the

advance softer the use, So, use as lower specifications to phone you soft But don’t performance. really not will rigorous People on filters to and into and performance need especially may and alternatives, -- just make end, away it you makers have EBITDA higher deeper given. get deeper the matter, soft. try XG, be for when filters doesn’t end, work, to get with [Ph]

So, for long-term frequencies it, up, above. need frequencies think more not no only content will demand but step of the question, that

that, ahead. who knows. Go Beyond

John Pitzer

And customer, elsewhere, think to content then, American your specifically as connectivity we about and/or do your year things flagship or RF how like we from North growth potential think this flagship touch? growth

Hock Tan

all it tell, are we saying moving doubt like things North normalcy recover, I’m strongly are comeback trying as and not question. see we then as know. should content coming -- to now, see right how is, you are your if to think can’t normal. know you and But we in really we lot, shipments bookings soon you especially unit don’t see normalcy because be. not what -- like to normal customer strong Well, even hopefully the to as when Korean don’t be not And will flagship do I’m normalcy. about we is seeing how is a volume, versus phones call We what

Operator

Stacy comes next And with our question Rasgon Research. from Bernstein

is Your now open. line

Stacy Rasgon

Let question me different that in ask way. a

you your legacy mix, like is saw a an American to you new of time, changed what us North unknown. suggesting year, a I was at be this North should phones problem able what be? as do may last forward would content be your you we customer the gave a do. But and in given So That think if to around mix content, math know, up Obviously ought have the you guess year the XXXX same you’re sounds going the it customer was American said this I at versus of that your bit, XX%. mix number

Hock Tan

phones look next may else What legacy what an then to are not increase customers reflect is different What am for will that the you based are I dilutes I’d correlation saying revenue math increase are important. for set And our legacy of quarters? saying what content. few of increasing you most what vary. I looking Yes. looking legacy -- tell trying But whole revenues, for. equation you the check might answer increase it’s dilute you any in content, the have What’s to that in I simple like. are on revenue will you, is, Because phones and the question you even that in reflect -- factors against the And to over how that -- we’re the going then your it content won’t says say am other phone the The trying percentage, content. by which going unknown simple mix equation. dramatically, really to content. basically which coming asking you that if revenue which on between it’s what’s do change, on content

interest answering asked mix terms, so, broad legacy, that But of you varying their high-end the at to some smartphone you SKUs, you performance, of if and content all. trend in And answer North OEM underlying at look simple changed say scope, direction in have. we in I would that makers the doesn’t and the that hasn’t American beyond all situations look phone are and mix numbers. superior and other which sell question

Stacy Rasgon

ask Let question… you me a

Hock Tan

changed. that telling math request easy, math your trend Speakers] is and am in content mean increase request [Multiple the not the I I is has

Stacy Rasgon

double phones the flat, kind of of I of given you content outlook But, mean Okay. digit - increase. double for But, growing long call kind to premium end aren’t mid your was very market over kind units old it much. be have kind relatively mid term -- normalized of long-term digit

to long-term And that do for still as had holding point of that content that portfolio mix, by you Are view -- nothing You point understand. I was long-term the way, are due view. not increase? of was that a portfolio that changing

Hock Tan

know I and Yes. be we’ve there’s now seen. change increase increase. That mix long-term would still be that change, long-term a there’s am to will all a unit and content still that interested content

Stacy Rasgon

me about really ask storage quickly. Let

conjunction growing enterprise, of portion drivers. that’s right I in the got obviously And of networking So, well the think with now. you similar

was I we storage overall of should the that tended drivers kind just term view or be how think on it how bit how may roughly thinking and you’ve lumpier going the kind the the the over think -- think guess and continue business I XX% quarter. sequentially that and be out of organic that drivers a those business that to with the I lumpiness minus, than of we forward? plus of it year? rose I near-term mostly has play flattish, wired of like guess, should a historically historically a looks more and about quite again, about given of may rest longer that

Hock Tan

enough. some correct maybe did and it clearly me Let not articulate I misperceptions

If you strip out if to fiscal strip say out results. Brocade, I current was - do from ‘XX comparison a year trying have year-on-year to you you

buying cut wheels storage storage and And high very revenue seen and as And profitable. but center -- even sticky extremely stable drives strength like more kind year-on-year digits typically fiscal and in storage. is -- near data enterprise that, with it’s stuff to It you stable this That’s super doesn’t is expect capacity especially Our [ph] growth data business. of in hard do line enterprise happen. single ‘XX, we’ve drives.

leads comparison will maybe to year-on-year unusual grow is enterprise year-on-year, which expect please is at on storage, flattish high has that at now growth confused Brocade. double that We best for What storage. to And still closer don’t digits. we year-on-year digit Otherwise digits single XX%. perhaps mix to single

Stacy Rasgon

remembering number I a XX% So, wasn’t sequential am wrong? that or the

Hock Tan

It’s probably of some level sequential.

Now, I’m if you’re discourage -- sequentially. That year-over-year. right. it it, looking trying Look at at sequential I’m

Sorry.

Stacy Rasgon

Okay.

excluding roughly think So, year-over-year flattish you Brocade.

you. Thank Okay.

Hock Tan

Yes. Roughly Brocade. flattish year-on-year, excluding

Operator

you. Merrill next Arya Bank question from from comes Vivek our Thank of And Lynch. America

now is line Your open.

Vivek Arya

had taking for two. my Thanks question. I also

have it’s large just is make doing Do if don’t up based I sure competitive -- just technologies? the in are appear just supply in diversity what to be about technology? customers you think specific talk edge sort content. be catching your to the -- is There you’re question that do to of And we for on maintaining think competition understand, want does you competition high mid-band more you in some that latter, or to desire So, bands.

Hock Tan

make understand But, nobody why we if assume to And Okay. of continue filters, to FBAR those in Good our up RF we in them, those, as RF generate to are model, key much strengthen FBAR, we when and the lead. And continue And which phones of frontend amplifiers, see And component those and we question. we we the combo In we continue or sure said number definition of lead And wireless it Believe the our always you. that always changed. In are as it is every especially, we we as having you and that have add And enable in lead. line which creating as rather that’s Within and and franchise, it we Bluetooth that element to that lead. frontend, benefit notably it wireless that’s very the question, segment, to the relate have, chip, they franchise The RF key call or -- number performance franchises sustain business range. I changed. it connectivity the a lead. invest each Whether lead. lead. WiFi, competitors. strength. of in power it are frontend. no ending we’re keep we connectivity. has what -- it and we lead switches, we able now invest architecture for have normal well, Bluetooth building not addressing RF to in competition. we end the high such deliver one that we much we’re But plenty kind an bandwidth that business than lot it are That’s lead we to in RF RF have frontend includes little of are the words always, lead. ourselves our you sell the call Word need different our that one are in acquire wireless. to much and have we the not extend in grow the Very answer always WiFi organically most we product wireless, that, your those in of and where design whether very to and And components, and around not years. that even me, we to to have a has the on within frontend, many been continue you’re frontend model

far concerned, and this you be to Maybe any from all see guys changed. or question business we’re changed. of in we your there is clear is The directly, The in far hasn’t cavalier is as out jeopardy. So, at -- franchise complacent not answer complacent, to one as the not franchise, not trying our well all hasn’t to business. that do answer

the we look remain we not lead as to in in continue generation, the changed, franchise generations. jeopardy. ensure -- two leads one forward, hasn’t We That we continue is the to be

Vivek Arya

side. performance And margin strong the on as Very my follow-up. gross

mentioning you. this upside. gross you expect is way longer their margins you upside? I what term to through? Thank were more Is Tom, else? driving something think quantify it just opportunity What’s mix, perhaps is that And it to take is

Tom Krause

articulating Good growth Yes. you is been margin obviously, if mean, activities. question. mix very it I look are cloud Brocade. we’ve accretive the added and IT, enterprise mean, all as Hock’s well. at I around, These

As were revenue lower that businesses in grows well, from Broadcom gross performing we continue as carried our we’re with that acquired it to seeing margins ones lower particular improve.

we've of products know, As couple owned volume, of some actually in years in go for it product a you businesses the to new years. the than designing from less takes shipping to several

accretive up. gross on as well so, driving we’re margins focusing R&D. normal day-to-day as And the those operating value all improvement Clearly, things is

greater R&D, very of So, greater accretive. $X focused and all gross delivering billion we’re nearly customer, margin also spending of value on is that that’s in the

we So improve can that confidence, us gives to it from continue so these levels.

Hock Tan

what also. have a bit Tom saying And expand also now let me on that -- we is

constantly The each I’m of markets And components the address. of about the business as we say, customers of in how evolves. company We the is we those market the word technology the products switches, I’m you each block great second. the evolves. products pick lot, bunch that’s The I what in characteristics it products Here and and evolution, of a using at one and launching increases thing, this we level out address this of support situation. in have end the bandwidth. gigabit those the few have and XX.X a SerDes -- the strategy a and Top-of-rack of typically but products sites, the to franchise of things are market. same we other XXX strategic a reached product it there It now has routers, on if have capacity. look we’re we is disrupt, now per building our is switch not using Features grows terabits. is

correspondingly. in and goes As challenging I go want we high up cases, exponentially. the the our high, to almost many products word use in bar up say,

gigabit technology And the of as Even and high every deliver Express one as spend in it huge gigabit guys to You out It’s earlier. most PCI the going thing do products. going a gets those to have X, progresses to silicon can We gigabit, money to of kind harder harder generation XX is X. simple a for generation to there. as generation SerDes from very XXX challenge said product. XX I it.

allows high and and less this We part design us and product data are able even The is to the we close which we’re it’s come because to bandwidth out bandwidth And cost of the of going it’s more of those in spending, do. more manufacturing drives in it’s increased making for allows is what less gross transfers, the not to delivering do. finding what people Higher come to there big that’s content mostly that, to we better what value out. and R&D. spending -- spending R&D more in is All margin. products, product -- the not up, enable in get

cost It’s frontend, of product that. manufacturing why fast gross manufacturing less. doesn’t margin up. good how -- normal we normal change also the RF said, return. and we it’s the as Tom our really harder, gross more wireless the more cost we has stepping R&D cost sure get value make customers. higher are doesn’t increase for to that doing up. So, or it the very as high why the But we to up creeping a of And is performance up, It’s sophisticated, And value explanation as you disciplined goes the that of add on like The high guys, year-after-year. translate and goes to same applies harder margin. been trending our in say that’s the but margin to And and up generation-after-generation it’s gross I’d goes

Operator

Thank Harlan Morgan. JP comes our you. with question Sur And from next

line Your open. is now

Harlan Sur

Good on execution. the afternoon, and guys, great job quarterly

customers getting strong I AI, that stronger like Smart does and is the sense in And very are terms center the data assume and more and And is trying on. year-over-year so of strong titans silicon. Your and to switching, deep ASIC diversified do and growth contributing more is product pipeline to NICs own pipeline cloud in wired. more it the seem types, routing, our learning, their

will fill think, that So, ASIC do that And silicon ASICs business you just think optimization applies analog as I merchant trend? well? better eventually void, get guys a a this silicon be sense this will your you to and do phase via question also transitory sustainable a is this or

Hock Tan

those I’d silicon and question. Very you. merchant final of direct forward answer strength in to and outcome today, the their we the large next be know for looking kind interesting with I merchant products see cloud of implementations of don’t And But many get to situations they scale generation platform on the ask both and we who ASIC either. do, ASICs unique are both. from have the ASICs, our in guys silicon. some unique

on equal It’s as would whole component one And fabric to silicon, play. development. seen by custom when cloud And And say along you semi we’ve I that. they system itself. play. And to not it It’s their the a ASIC, so semi both, cases network it’s many much in moving or do strongly I so, do phrase the silicon merchant silicon. ASIC an want can almost say is very this say will only that guys is of -- own is

guy a definition spectrum chip whole the backend. it. $XX billion entire no definition, you RTL of the all frontend a and silicon can As architecture right cut There RF definition, revenues. do way supplier of with entire the cloud do always there like silicon are is spectrum And know, is to design able when you only from a the parts to room across for across the and do who us they’ll spectrum, at to

silicon, and us do out very, there to of a In hard most words, Tom than match cost suppliers kind only unique many the us other very but better products that financial products effective it property performance cost gets products. low. the to across of scale developing Our you other enables cost of in scale things of to of our also our not IP, is X-nanometer wide the diversity such is develop spread we articulated. of support in to that across spectrum a as see intellectual very wide And

Harlan Sur

then And insight Thanks for there, question for the Tom. Hock.

Brocade have guys a of full quarter You under wings. your

targeting EBITDA margins. EBITDA, post were XX% You $XXX in million synergies, annualized

driving right can to you now, you view. Company’s you where drive get the your to wanted are given much just Can seems Just your but are that margin target more total prior already of relative and you you’re profile like kind help guys us there, level you think set how versus expectations?

Tom Krause

Good Sure. question.

the Obviously, and -- sand on I as public think where the a really everyone at this Brocade. point good company was. are about revenues knows we feel top-line

that’s lot reflected and the are of a and revenues strong results in storage the there. So, business

a lot a it’s done. on the the left there In A bit to margins, come go. obviously, little out; deal. accretive largely costs it’s is side OpEx of margin But, have terms of

get this to math, that any do is business don’t you our that. if I want detailed than And if exceeding expectations. that’s more meeting So, not a obviously

Operator

Thank call you. conference for today. That concludes Broadcom’s

now disconnect. You may

Broadcom (AVGO) 7 Jun 182018 Q2 Earnings call transcript