Broadcom Limited (NASDAQ:AVGO) Q3 2019 Earnings Conference Call Transcript

Sep 12, 2019 • 05:00 pm ET

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Broadcom Limited (NASDAQ:AVGO) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Welcome to Broadcom Incorporated Third Quarter Fiscal Year 2019 Financial Results Conference Call.

At this time, for opening remarks and introductions, I would like to turn the call over to Beatrice Russotto, Director of Investor Relations of Broadcom Incorporated. Please go ahead, ma'am.

Executive
Beatrice F. Russotto

Thank you, operator, and good afternoon everyone. Joining me today are Hock Tan, President and CEO; and Tom Krause, Chief Financial Officer of Broadcom.

After the market closed today, Broadcom distributed a press release and financial tables describing our financial performance for the third quarter of fiscal year 2019. If you did not receive a copy, you may obtain the information from the Investors section of Broadcom's website at broadcom.com. This conference call is being webcast live and a recording will be available via telephone playback for one week. It will also be archived in the Investors section of our website at broadcom.com.

During the prepared comments section of this call, Hock and Tom will be providing details of our third quarter fiscal year 2019 results, guidance for fiscal year 2019, and commentary regarding the business environment. We will take questions after the end of our prepared comments. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call.

In addition to US GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results.

I'll now turn the call over to Hock.

Executive
Hock E. Tan

Thank you, Bea. Good afternoon everyone and thank you for joining us today. Looking at the third quarter, consolidated net revenue was $5.5 billion, a 9% increase from a year ago. Semiconductor solution revenue was $4.4 billion, down 5% year-on-year and up 6% quarter-over-quarter. Networking continued to perform well driven by strong demand for our merchant switching and routing platforms, and as we also expected shipments of custom silicon solutions in AI, SmartNIC and video transcoding to cloud datacenters were strong.

Wireless is of course seeing the beginning of a typical seasonal uptick and the initial -- and an initial positive effects of increased content. These tailwinds were partially offset by weaker demand in storage and broadband. Revenue for infrastructure software was $1.1 billion. The CA business is running above our expectations, benefiting from sustained enterprise demand for our mainframe and distributed software. However, SAN switching demand has paused, as our partner OEM supply chain compressed in this uncertain conditions.

Now let me address the current environment and outlook. Enterprise and mainframe software customer demand continues to remain stable, particularly in North America and Western Europe. SAN switching demand will likely continue to be down another quarter, while inventory in the OEM channels have been worked down. As it relates to semiconductors, although the US-China trade conflict continues, we