Wed Aug 24, 2011 11:38am EDT
Aug 24 (Reuters) – Shares of Avago Technologies ltd (AVGO.O)rose more than 14 percent on Wednesday, a day after the analogchipmaker bucked the trend with a strong third quarter andforecast robust sales to smartphone customers boosting revenuegrowth.
The semiconductor industry is facing a slowdown as PC salesdrop, supply chain problems related to the earthquake in Japanlinger and the weak macro environment weigh on tech costs.
Avago, however, said it expects to sell more chips as itslarge OEM customers ramp up new designs of next-generationsmartphones.
Analysts expect chip sales to jump between October-Januaryas Apple inc (AAPL.O) and Samsung Electronics co (005930.KS)launch new smartphones.
“While macro concerns remain a headwind for all semis,company specific drivers at Aavgo should offset broader economicissues,” Credit Suisse said in a investigate note to clients.
The brokerage raised its price target on the stock to $38from $36 and maintained its “outperform” rating.
Avago, which competes with Analog Devices inc (ADI.N), RFMicro Devices inc (RFMD.O) and Finisar Corp (FNSR.O), expectsfourth-quarter revenue of $615-$633 million. [ID:nL4E7JN4CE]
“Wireless is well positioned to ramp in October/January withthe upcoming iPhone and manifold 4G smartphone launches,”Citigroup said, and added the company to its “top picks” list.
The brokerage added that Avago’s manufacturing unit will alsoremain intact as it has significant exposure to Asia, which isnot hurting as much as North America.
Avago expects its manufacturing business, which fiscal statement for athird of total revenue, to be roughly flat sequentially in thefourth quarter on nonstop inventory adjustments among itscomponent distributors.
Last week, rival Analog Devices said it expects itsfourth-quarter revenue to be hurt by lower customer costs.[ID:nL3E7JG3NL]
Shares of the company, which counts IBM (IBM.N) and CiscoSystems inc (CSCO.O) among its customers, were up 9 percent at$31.98 in later morning trade. they had earlier touched $33.46,making it one of the largest gainers on Nasdaq.
(Exposure by Rachana Khanzode and Sayantani Ghosh inBangalore; Editing by Sriraj Kalluvila)
((rachana.khanzode@thomsonreuters.com; Within U.S. +1 646 2238780; outside U.S. +91 80 4135 5800; Reuters Messaging:rachana.khanzode.thomsonreuters.com@reuters.net)) Keywords: AVAGO/
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Avago shares jump on strong chip sales outlook
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