Jefferies said Apple's better than expected quarterly results is positive for Broadcom Corp. (NASDAQ: BRCM) and Avago Technologies Ltd. (NASDAQ: AVGO).
Apple beat expectations for the first quarter due in part to higher than expected iPhone and iPad shipments. Sales of iPhone and iPad more than doubled from last year to 37.04 million units and 15.43 million units, respectively.
Furthermore, Apple indicated that channel inventories were below normal levels. Jefferies analyst Peter Misek noted Apple iPhone shipments beat consensus by 7 million units while iPad beat by 1.5 million units.
Meanwhile, Broadcom and Avago supply components for the iPhone and the iPad and thereby an increase in shipments would favor these companies.
Based on recent iPhone and iPad teardowns, we believe that BRCM ships WiFi Combo chips into all iPhones and iPads for a price of around $4-$5. We also believe that BRCM ships a touch controller into the iPad2,Jefferies analyst Mark Lipacis wrote in a note to clients.
The analyst said internet tear downs of Apple iPhones lead him to believe that Avago ships an FBAR filter into the Verizon iPhone 4 and a multi-mode power amp into the iPhone 4S for an estimated average selling price of $2-$3. Avago's film bulk acoustic resonators (FBAR) filters dramatically shrink the size of duplexers, multiplexers and filters in mobile handsets. The low insertion loss and performance shift over temperature makes them ideal for CDMA requirements.
While it is difficult to determine timing of component shipments for 4Q iPhone and iPad sales, we view the magnitude of the upside for Apple as a positive indicator for BRCM and AVGO, added Lipacis.