AmTech analyst Shaw Wu reiterates his Buy rating and $29 price target on Broadcom (BRCM), citing his conviction that BRCM will be able to make its strong guidance as a result in high demand for iPhones, the iPod Touch, and the Nintendo Wii:
our recent supply chain checks indicate that key reasons for the underlying strength are related to iPhone, iPod touch, and the Nintendo Wii. We are picking up that production plans have been ramped upwards for 2H due to anticipation of stronger than expected demand (and also potentially for use in new unannounced devices).
Wu is also pleased with BRCM’s planned stock buy-back plan and is also excited about rumoured acquisition plans for AMD’s digital TV business:
In addition, we view BRCM ‘ s recent announcement of a $1 billion stock buy-back as a positive. We view this as a vote of confidence by management in its continued ability to generate strong cash flow even in a tougher macroeconomic environment… In terms of recent speculation regarding an acquisition of AMD’s ATI digital TV business, we would view such a deal as a positive as we believe this has a higher degree of success given BRCM ‘ s decent track record in digital TV and its relatively small size. In addition, ATI would strengthen BRCM ‘ s already strong graphics/video technology portfolio and bring in new customers.
Finally, Wu thinks that Nokia’s (NOK) desire to diversify its supplier base could have a significant impact on BRCM:
Our supply chain checks indicate that its Bluetooth business at NOK is ramping fairly aggressively as NOK lessens its dependence on other suppliers. Going forward, we think there is opportunity for BRCM to win and ramp other products at NOK including GPS, Wi-Fi, video processors, touch controllers, application processors, etc.
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