Broadcom Corp. said it is cutting as many as 1,150 jobs and forecast fourth-quarter revenue below analysts' estimates as demand slows for its chips that connect mobile phones to the Internet.
The Irvine company's shares fell as much as 8.6% in late trading. Sales will be about $1.98 billion, plus or minus 3%, the company said Tuesday. That indicates revenue of $1.92 billion to $2.03 billion, while analysts on average had predicted $2.13 billion, according to data compiled by Bloomberg.
While Broadcom dominates the market for chips that provide short-distance wireless connections in devices such as Apple Inc.'s iPhone and iPad, its struggle to roll out new cellular technologies has hurt its ability to grab more orders in smartphones. The lack of a chip that supports LTE, or long-term evolution, may tempt customers to switch to rivals, said Alex Gauna, an analyst at JMP Securities in San Francisco.
"Right now they're losing market share, but it's not a cliff," Gauna said. "What's very clear now is that what the market wants is a road map to LTE."
Broadcom shares slid as low as $24.80 in extended trading after the announcement, after closing down 18 cents at $27.14. That left them down 18% this year.
The company is eliminating employees to pare expenses, with a third of the reductions coming among workers gained with its acquisition of a Renesas Electronics Corp. business unit. Broadcom had a staff of 11,300 at the end of 2012, according to data compiled by Bloomberg.
Some of Broadcom's 3G-chip customers are cutting inventory, and the company is facing "ferocious" price competition for that product, Chief Executive Scott McGregor said.
Broadcom also needs to field LTE modems to help it regain some connectivity business because some phone makers, particularly those building cheaper handsets for markets such as China, prefer to buy both chips from the same provider, he said.
"Long term, I believe this business is pretty vibrant," McGregor said.
Third-quarter net income rose 44% to $316 million, or 55 cents a share, from $220 million, or 38 cents, a year earlier, Broadcom said. Sales were little changed at $2.15 billion. Excluding certain items, profit was 76 cents. On that basis, analysts had predicted profit of 68 cents and sales of $2.13 billion.
McGregor is moving Broadcom into the market for baseband chips used to connect phones to cellular networks, a business dominated by Qualcomm Inc. This month, Broadcom said it bought LTE-related capabilities from Japanese chip maker Renesas, a move that some analysts took as an admission that the company's in-house efforts to develop that technology had fallen behind schedule.