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Broadcom results beat forecasts but China hurts

(New throughout, adds comment from analyst, background on company)

By Noel Randewich

SAN FRANCISCO, April 24 (Reuters) - Broadcom Corp beat Wall Street expectations in the first quarter, although profit and revenue were lower than a year earlier as the company's high-end chips for smartphones faced fierce competition in China.

Underscoring those concerns, Broadcom's revenue guidance for the June quarter was slightly below some analyst expectations. Its stock fell more than 2 percent in extended trading due to worries about how the company's new 4G chips will fare in a crowded market.

Broadcom and other smartphone chipmakers must adjust as industry growth shifts away from North America toward China and other developing countries where consumers favor handsets selling for under $200 rather than top-tier devices like Apple's iPhone.

Broadcom gets around half its revenues from mobile. In the first quarter, the Irvine, California company reported strength from its other businesses including infrastructure and sales of home products like modems and set-top boxes.

"Their infrastructure business is probably doing better with 3G and 4G base station deployments, plus their Ethernet switch business is probably doing well," Stifel Nicolaus analyst Kevin Cassidy said of the quarterly results.

Broadcom is a leader in connectivity chips with features like Wifi and Bluetooth. Its components are widely used in high-end smartphones, including the iPhone.

On Wednesday, Apple reported sales of 43.7 million iPhones in the quarter ended March, far outpacing the roughly 38 million that Wall Street had predicted.

But Broadcom's connectivity chips are used less often in low-end handsets. These are typically made with chips that combine connectivity features with carrier-network technology like 3G or Long-Term Evolution, also known as 4G, which Broadcom's rival Qualcomm dominates.

Broadcom is responding to the market shift toward low-cost devices by launching its own 4G technology to compete with Qualcomm but progress has been slow. Investors are concerned about how much Broadcom can increase 4G revenues through 2014, as it challenges Qualcomm and also faces competition from Intel, MediaTek and other new 4G players.

Asked on a conference call with analysts on Thursday whether he still expects to grow revenue form connectivity chips this year, Broadcom CEO Scott McGregor said, "I think with the slowing of smartphones, it's going to make that more challenging."

He said he expects an improvement in revenue from Broadcom's smartphone chips in the second half of 2014.

Broadcom reported first-quarter revenue of $1.98 billion, down 1 percent from the year-ago period. It said revenue in the second quarter would be between $2.0 billion and $2.1 billion.

Analysts on average had expected first-quarter revenue of $1.958 billion and second-quarter revenue of $2.072 billion, according to Thomson Reuters I/B/E/S.

In the first quarter, Broadcom had a net profit of $165 million, or 28 cents a share, down from $191 million, or 33 cents a share, last year.

Non-GAAP earnings per share were 51 cents in the first quarter. Analysts on average expected 46 cents.

Broadcom's stock declined 2.5 percent in extended trading after closing up 2.4 percent at $31.14 in regular Nasdaq trade.

(Reporting by Noel Randewich; editing by Meredith Mazzilli, Matthew Lewis and David Gregorio)