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Avago Technologies: Fiscal 4Q15 Financial Results

Enterprise storage up 9% Q/Q and 38% Y/Y at $35 million

(in $ million) 4Q14 4Q15 FY14 FY15
Revenue 1,590 1,840 4,269 6,824
Growth   16%   60%
Net income (loss) 135 429 263 1,364

 Avago Technologies Limited reported financial results for the fourth fiscal quarter and fiscal year ended November 1, 2015.

Avago’s financial results include results from LSI Corporation’s continuing operations starting the third fiscal quarter of 2014, from PLX Technology Inc. starting in the fourth fiscal quarter of 2014, and from Emulex Corporation starting the third fiscal quarter of 2015, in each case from the date of their acquisition. The financial results from businesses that have been classified as discontinued operations in the company’s financial statements are not included in the results presented below, unless otherwise stated.

Fourth Quarter Fiscal Year 2015 GAAP Results

  • Net revenue was $1,840 million, an increase of 6% from $1,735 million in the previous quarter and an increase of 16% from $1,590 million in the same quarter last year.
  • Gross margin was $997 million, or 54% of net revenue. This compares with gross margin of $884 million, or 51% of net revenue last quarter, and gross margin of $788 million, or 50% of net revenue in the same quarter last year.
  • Operating expenses were $483 million. This compares with $585 million in the prior quarter and $487 million for the same quarter last year.
  • Operating income was $514 million, or 28% of net revenue. This compares with operating income of $299 million, or 17% of net revenue, in the prior quarter, and $301 million, or 19% of net revenue, in the same quarter last year.
  • Net income, which includes the impact of discontinued operations, was $429 million, or $1.49 per diluted share. This compares with net income of $240 million, or $0.84 per diluted share, for the prior quarter, and $135 million, or $0.50 per diluted share in the same quarter last year.
  • The company’s cash balance at the end of the fourth fiscal quarter was $1,822 million, compared to $1,354 million at the end of the prior quarter.
  • The company generated $582 million in cash from operations and spent $106 million on capital expenditures in the fourth fiscal quarter of 2015. In addition, during that quarter, the company realized $47 million in net proceeds from the sale of Emulex’s prior HQs building.

On September 30, 2015, the company paid a cash dividend of $0.42 per ordinary share, totaling $116 million.

Fourth Quarter Fiscal Year 2015 Non-GAAP Results From Continuing Operations

  • Net revenue from continuing operations was $1,853 million, an increase of 6% from $1,750 million in the previous quarter, and an increase of 15%, from $1,610 million, in the same quarter last year.
  • Gross margin from continuing operations was $1,149 million, or 62% of net revenue. This compares with gross margin of $1,063 million, or 61% of net revenue, last quarter and gross margin of $939 million, or 58% of net revenue, in the same quarter last year.
  • Operating income from continuing operations was $811 million, or 44% of net revenue. This compares with operating income from continuing operations of $733 million, or 42% of net revenue, in the prior quarter, and $636 million, or 40% of net revenue, in the same quarter last year.
  • Net income from continuing operations was $737 million, or $2.51 per diluted share. This compares with net income of $660 million, or $2.24 per diluted share last quarter, and net income of $556 million, or $1.99 per diluted share, in the same quarter last year.

We finished fiscal 2015 on a very strong note, delivering record levels of revenue and profitability in our recently completed fourth quarter. The LSI acquisition and the synergies we have been able to realize through its integration, as well as strong year on year growth in wireless revenues were significant contributors to our 2015 results,” said Hock Tan, president and CEO. “We are excited by the anticipated opportunities to further increase our earnings potential in fiscal 2016 following completion of our pending Broadcom acquisition.”

avago 4Q15
* Represents percentages of non-GAAP net revenue.

Fiscal Year 2015 Financial Results From Continuing Operations

  • GAAP net revenue from continuing operations was $6,824 million, an increase of 60% from $4,269 million in the prior year.
  • GAAP gross margin was $3,553 million, or 52% of net revenue, versus $1,877 million, or 44% of net revenue, in fiscal year 2014.
  • GAAP operating income was $1,632 million compared with $438 million in the prior year. GAAP net income, which includes the impact from discontinued operations, was $1,364 million, or $4.85 per diluted share. This compares with GAAP net income of $263 million, or $0.99 per diluted share, in fiscal year 2014.
  • Non-GAAP net revenue from continuing operations was $6,905 million, an increase of 60% from $4,307 million in the prior year.
  • Non-GAAP gross margin was $4,184 million, or 61% of net revenue, versus $2,421 million, or 56% of net revenue, in fiscal year 2014.
  • Non-GAAP operating income from continuing operations was $2,926 million. This compares with $1,521 million in the prior year.
  • Non-GAAP net income was $2,613 million, or $8.98 per diluted share. This compares with non-GAAP net income of $1,343 million, or $4.90 per diluted share, in fiscal year 2014.

Based on current business trends and conditions, the outlook for continuing operations
for 1FQ16, ending January 31, 2016, is expected to be as follows:

  • Revenue: $1,780 million +/- $25 million
  • Operating expenses: $314 million
  • Gross margin: $150 million (61% +/- 1%)

Comments

Abstracts of the earnings call transcript:

Hock Tan, president and CEO:
"While that is just one part of our portfolio, let me now turn to another segment of portfolio, which has been performing rather amazing, and that's our enterprise storage segment. In the fourth quarter, enterprise storage revenue grew by 9% sequentially and enterprise storage represented 35% of our total revenue from continuing operations. In the fourth quarter, we also saw strong growth from our RAID and SAS products. We also benefited from increasing shipments into enterprise and datacenter hard disk drives. Despite macro worries, enterprise storage markup held up quite well in fiscal 2015 and in fact, our core enterprise storage revenues in the fourth quarter grew close to 20% on a year-on-year basis. Looking towards first quarter 2016, we expect this segment to maintain its momentum from the strong fourth quarter and we expect revenue to be up slightly on a sequential basis. We also believe we may be gaining share in this segment."

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