Does anyone know why Broadcom took 501 million dollar change this quarter?
Did NetLogic operation loose this money? Why wasn’t it projected by Managements and analysis?
How do we know more 1-time charges like this won’t come by?
How come NetLogic’s acquisition hasn’t improved Broadcom’s top/bottom lines yet?
They might have over-valued and hence over-paid for this acquisition. The impact of NetLogic on earnings was less than expected so based on that the company has lowered the real value of Netlogic and written off the extra paid during acquisition. This could be just a tax play but I think it's bigger than that. The market is fearing that the company may have even more capital (mis)allocation problems. It always starts with a little here and there and then before you know it they pull the rug from under your feet.
On the other hand, the company is profitable, makes good products, still have great margins and the only way from here is up up and away.
You can pull up their 10Q and get the full discussion of this impairment charge on page 30. Net Logic's operation is included in the Infrastructure and Networking section of their income statement which shows strong profit growth year over year. From the statement, this is a one time charge, often taken by companies to reduce their tax exposure and does not have a negative impact on cash or cash flow. Matter of fact it increases cash by reducing taxes.
Bottom line, this charge is a total over reaction by the market and this stock should be at least $35.