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Avago Technologies’ 3Q15 Earnings Report

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Operating income declined despite increase in revenue

Avago Technologies (AVGO) constitutes 0.62% of the PowerShares QQQ Trust (QQQ). The company is a leading designer, developer, and global supplier of digital, mixed-signal, and optoelectronic components.

Avago reported its 3Q15 earnings on August 26, 2015. The company generated a revenue of ~$1.74 billion, up from ~$1.61 billion the previous quarter—an increase of 7.5%. The company’s operating income remained at $299 million, compared to $428 million the previous quarter. Its operating income reduced by 28.47%, despite an increase in revenue as well as gross profit.

 

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Expense drivers

This quarter Avago incurred restructuring and asset impairment charges of $98 million, compared to $10 million in the previous quarter. These charges made an impact on the company’s net income, which lead to decreased EPS (earnings per share)—down to $0.84 from $1.21 in the previous quarter, on a GAAP basis. By comparison, Avago’s peers Micron (MU), Nvidia (NVDA), and Texas Instruments (TXN) had EPSs that stood at $0.42, $0.05, and $0.65, respectively.

Avago’s cash flows from operating activities remained at $592 million, down from $663 million the previous quarter—a decline of 10.71%. Its cash flow from investing and financing activities also declined by 263.76% and 109.39%, respectively, from the previous quarter. This decline lead to an overall decline in cash and cash equivalents by 46%. The majority of the expenses incurred in acquisition of the business and debt repayments.

In the next and final part of this series, we’ll look at Avago’s most recent stock trends.

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