Avago Technologies Ltd (AVGO) could see an uptick in 2Q13 at the introduction of Apple’s (AAPL) next smartphone, while seeing a longer-term growth opportunity through its exposure to LTE-based mobile devices, says Doug Freedman, Analyst and Managing Director at RBC Capital Markets.
“It’s actually been an underperformer because of the handset transition going on over at Apple where they are — Apple in the past has been about a 20% customer for them. And the weakness at Apple is well-known, and investors are very afraid of what impact that’s going to have on the second-quarter earnings from Avago. They are an off-quarter company. So they will have a July quarter-end for their Q2, and that could start to see the uptick of the next phone introduction out of Apple,” Freedman said.
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Freedman says the shorter-term weakness will yield to the longer-term thesis of growing LTE smartphone adoption, leading to AVGO-supplied increased semiconductor content in these types of phones.
“Longer term, the thesis on Avago relates to their exposure to LTE-based handsets, and I view them as a company that will win an increasing amount of content as the market moves to bring LTE to the mainstream phone volumes,” Freedman said.
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