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California
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33-0480482
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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x
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Accelerated filer
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¨
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|
|
|
|
|
|
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Non-accelerated filer
|
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
|
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¨
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|
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Page
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|
|
|
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Item 1.
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Financial Statements
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
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(In millions)
|
||||||
ASSETS
|
|||||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,976
|
|
|
$
|
2,545
|
|
Short-term marketable securities
|
1,208
|
|
|
1,061
|
|
||
Accounts receivable, net
|
922
|
|
|
804
|
|
||
Inventory
|
612
|
|
|
531
|
|
||
Prepaid expenses and other current assets
|
145
|
|
|
131
|
|
||
Total current assets
|
4,863
|
|
|
5,072
|
|
||
Property and equipment, net
|
626
|
|
|
516
|
|
||
Long-term marketable securities
|
3,161
|
|
|
2,383
|
|
||
Goodwill
|
3,717
|
|
|
3,710
|
|
||
Purchased intangible assets, net
|
462
|
|
|
664
|
|
||
Other assets
|
161
|
|
|
126
|
|
||
Total assets
|
$
|
12,990
|
|
|
$
|
12,471
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|||||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
594
|
|
|
$
|
503
|
|
Wages and related benefits
|
220
|
|
|
220
|
|
||
Deferred revenue and income
|
36
|
|
|
36
|
|
||
Accrued liabilities
|
696
|
|
|
791
|
|
||
Total current liabilities
|
1,546
|
|
|
1,550
|
|
||
Long-term debt
|
1,594
|
|
|
1,593
|
|
||
Other long-term liabilities
|
247
|
|
|
277
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Common stock
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
12,537
|
|
|
12,595
|
|
||
Accumulated deficit
|
(2,860
|
)
|
|
(3,455
|
)
|
||
Accumulated other comprehensive loss
|
(74
|
)
|
|
(89
|
)
|
||
Total shareholders’ equity
|
9,603
|
|
|
9,051
|
|
||
Total liabilities and shareholders’ equity
|
$
|
12,990
|
|
|
$
|
12,471
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions, except per share data)
|
||||||||||||||
Net revenue
|
$
|
2,096
|
|
|
$
|
2,041
|
|
|
$
|
4,154
|
|
|
$
|
4,025
|
|
Cost of revenue
|
939
|
|
|
1,005
|
|
|
1,911
|
|
|
2,009
|
|
||||
Gross profit
|
1,157
|
|
|
1,036
|
|
|
2,243
|
|
|
2,016
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
538
|
|
|
634
|
|
|
1,077
|
|
|
1,270
|
|
||||
Selling, general and administrative
|
188
|
|
|
182
|
|
|
365
|
|
|
367
|
|
||||
Amortization of purchased intangible assets
|
2
|
|
|
9
|
|
|
3
|
|
|
18
|
|
||||
Impairments of long-lived assets
|
—
|
|
|
165
|
|
|
143
|
|
|
190
|
|
||||
Restructuring costs, net
|
4
|
|
|
23
|
|
|
11
|
|
|
28
|
|
||||
Settlement costs
|
1
|
|
|
16
|
|
|
1
|
|
|
18
|
|
||||
Other charges (gains), net
|
22
|
|
|
(7
|
)
|
|
18
|
|
|
(59
|
)
|
||||
Total operating expenses
|
755
|
|
|
1,022
|
|
|
1,618
|
|
|
1,832
|
|
||||
Income from operations
|
402
|
|
|
14
|
|
|
625
|
|
|
184
|
|
||||
Interest expense, net
|
(3
|
)
|
|
(5
|
)
|
|
(8
|
)
|
|
(10
|
)
|
||||
Other expense, net
|
(5
|
)
|
|
(8
|
)
|
|
(5
|
)
|
|
(5
|
)
|
||||
Income before income taxes
|
394
|
|
|
1
|
|
|
612
|
|
|
169
|
|
||||
Provision for income taxes
|
8
|
|
|
2
|
|
|
17
|
|
|
5
|
|
||||
Net income (loss)
|
$
|
386
|
|
|
$
|
(1
|
)
|
|
$
|
595
|
|
|
$
|
164
|
|
Net income (loss) per share (basic)
|
$
|
0.64
|
|
|
$
|
—
|
|
|
$
|
0.99
|
|
|
$
|
0.28
|
|
Net income (loss) per share (diluted)
|
$
|
0.63
|
|
|
$
|
—
|
|
|
$
|
0.97
|
|
|
$
|
0.28
|
|
Weighted average shares (basic)
|
602
|
|
|
587
|
|
|
601
|
|
|
585
|
|
||||
Weighted average shares (diluted)
|
616
|
|
|
587
|
|
|
614
|
|
|
593
|
|
||||
Dividends per share
|
$
|
0.14
|
|
|
$
|
0.12
|
|
|
$
|
0.28
|
|
|
$
|
0.24
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Net income (loss)
|
$
|
386
|
|
|
$
|
(1
|
)
|
|
$
|
595
|
|
|
$
|
164
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments, net of $0 tax in 2015 and 2014
|
32
|
|
|
14
|
|
|
12
|
|
|
13
|
|
||||
Unrealized gains (losses) on marketable securities, net of $0 tax in 2015 and 2014
|
(2
|
)
|
|
—
|
|
|
3
|
|
|
1
|
|
||||
Other comprehensive income
|
30
|
|
|
14
|
|
|
15
|
|
|
14
|
|
||||
Comprehensive income
|
$
|
416
|
|
|
$
|
13
|
|
|
$
|
610
|
|
|
$
|
178
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In millions)
|
||||||
Operating activities
|
|
|
|
||||
Net income
|
$
|
595
|
|
|
$
|
164
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
82
|
|
|
99
|
|
||
Stock-based compensation expense
|
176
|
|
|
233
|
|
||
Acquisition-related items:
|
|
|
|
||||
Amortization of purchased intangible assets
|
70
|
|
|
115
|
|
||
Impairments of long-lived assets
|
143
|
|
|
190
|
|
||
Loss (gain) on sale of assets and other
|
3
|
|
|
(47
|
)
|
||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
||||
Accounts receivable, net
|
(117
|
)
|
|
(1
|
)
|
||
Inventory
|
(81
|
)
|
|
(90
|
)
|
||
Prepaid expenses and other assets
|
(56
|
)
|
|
(4
|
)
|
||
Accounts payable
|
88
|
|
|
97
|
|
||
Deferred revenue
|
(14
|
)
|
|
105
|
|
||
Other accrued and long-term liabilities
|
(112
|
)
|
|
(30
|
)
|
||
Net cash provided by operating activities
|
777
|
|
|
831
|
|
||
Investing activities
|
|
|
|
||||
Net purchases of property and equipment
|
(173
|
)
|
|
(158
|
)
|
||
Net cash paid for acquired companies
|
—
|
|
|
(6
|
)
|
||
Proceeds from sale (purchases) of certain assets and other
|
(15
|
)
|
|
90
|
|
||
Purchases of marketable securities
|
(2,682
|
)
|
|
(913
|
)
|
||
Proceeds from sales and maturities of marketable securities
|
1,758
|
|
|
970
|
|
||
Net cash used in investing activities
|
(1,112
|
)
|
|
(17
|
)
|
||
Financing activities
|
|
|
|
||||
Repurchases of Class A common stock
|
(463
|
)
|
|
(191
|
)
|
||
Dividends paid
|
(168
|
)
|
|
(140
|
)
|
||
Proceeds from issuance of common stock
|
475
|
|
|
283
|
|
||
Minimum tax withholding paid on behalf of employees for restricted stock units
|
(78
|
)
|
|
(59
|
)
|
||
Net cash used in financing activities
|
(234
|
)
|
|
(107
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
(569
|
)
|
|
707
|
|
||
Cash and cash equivalents at beginning of period
|
2,545
|
|
|
1,657
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,976
|
|
|
$
|
2,364
|
|
1.
|
Summary of Significant Accounting Policies
|
2.
|
Supplemental Financial Information
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
|
(In millions)
|
||||||
Work in process
|
$
|
228
|
|
|
$
|
180
|
|
Finished goods
|
384
|
|
|
351
|
|
||
|
$
|
612
|
|
|
$
|
531
|
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
|
(In millions)
|
||||||
Accrued rebates
|
$
|
513
|
|
|
$
|
574
|
|
Accrued taxes
|
26
|
|
|
28
|
|
||
Accrued royalties
|
19
|
|
|
19
|
|
||
Accrued settlement charges
|
17
|
|
|
17
|
|
||
Accrued legal costs
|
12
|
|
|
10
|
|
||
Warranty reserve
|
6
|
|
|
6
|
|
||
Restructuring liabilities
|
7
|
|
|
28
|
|
||
Other
|
96
|
|
|
109
|
|
||
|
$
|
696
|
|
|
$
|
791
|
|
|
June 30,
2015 |
|
December 31,
2014 |
||||
|
(In millions)
|
||||||
Deferred revenue
|
$
|
91
|
|
|
$
|
105
|
|
Accrued taxes
|
77
|
|
|
77
|
|
||
Deferred rent
|
30
|
|
|
38
|
|
||
Deferred tax liabilities
|
17
|
|
|
17
|
|
||
Accrued settlement charges
|
9
|
|
|
17
|
|
||
Other long-term liabilities
|
23
|
|
|
23
|
|
||
|
$
|
247
|
|
|
$
|
277
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In millions)
|
||||||
Beginning balance
|
$
|
574
|
|
|
$
|
409
|
|
Charged as a reduction of revenue
|
440
|
|
|
363
|
|
||
Reversal of unclaimed rebates
|
(11
|
)
|
|
(19
|
)
|
||
Payments
|
(490
|
)
|
|
(322
|
)
|
||
Ending balance
|
$
|
513
|
|
|
$
|
431
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions, except per share data)
|
||||||||||||||
Numerator: Net income (loss)
|
$
|
386
|
|
|
$
|
(1
|
)
|
|
$
|
595
|
|
|
$
|
164
|
|
Denominator for net income (loss) per share (basic)
|
602
|
|
|
587
|
|
|
601
|
|
|
585
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock awards
|
14
|
|
|
—
|
|
|
13
|
|
|
8
|
|
||||
Denominator for net income (loss) per share (diluted)
|
616
|
|
|
587
|
|
|
614
|
|
|
593
|
|
||||
Net income (loss) per share (basic)
|
$
|
0.64
|
|
|
$
|
—
|
|
|
$
|
0.99
|
|
|
$
|
0.28
|
|
Net income (loss) per share (diluted)
|
$
|
0.63
|
|
|
$
|
—
|
|
|
$
|
0.97
|
|
|
$
|
0.28
|
|
3.
|
Fair Value Measurements
|
|
June 30, 2015
|
||||||||||||||||||||||||||
|
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Cash and Cash Equivalents
|
|
Short-Term Marketable Securities
|
|
Long-Term Marketable Securities
|
||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||
Cash
|
$
|
1,235
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,235
|
|
|
$
|
1,235
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Bank and time deposits
|
378
|
|
|
—
|
|
|
—
|
|
|
378
|
|
|
378
|
|
|
—
|
|
|
—
|
|
|||||||
Money market funds
|
132
|
|
|
—
|
|
|
—
|
|
|
132
|
|
|
132
|
|
|
—
|
|
|
—
|
|
|||||||
U.S. treasury and agency obligations
|
1,852
|
|
|
1
|
|
|
(1
|
)
|
|
1,852
|
|
|
6
|
|
|
134
|
|
|
1,712
|
|
|||||||
Subtotal
|
2,362
|
|
|
1
|
|
|
(1
|
)
|
|
2,362
|
|
|
516
|
|
|
134
|
|
|
1,712
|
|
|||||||
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Commercial paper
|
225
|
|
|
—
|
|
|
—
|
|
|
225
|
|
|
225
|
|
|
—
|
|
|
—
|
|
|||||||
Corporate bonds
|
2,341
|
|
|
2
|
|
|
(1
|
)
|
|
2,342
|
|
|
—
|
|
|
1,058
|
|
|
1,284
|
|
|||||||
Asset-backed securities and other
|
181
|
|
|
—
|
|
|
—
|
|
|
181
|
|
|
—
|
|
|
16
|
|
|
165
|
|
|||||||
Subtotal
|
2,747
|
|
|
2
|
|
|
(1
|
)
|
|
2,748
|
|
|
225
|
|
|
1,074
|
|
|
1,449
|
|
|||||||
Level 3:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Level 3: None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total
|
$
|
6,344
|
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
6,345
|
|
|
$
|
1,976
|
|
|
$
|
1,208
|
|
|
$
|
3,161
|
|
|
December 31, 2014
|
||||||||||||||||||||||||||
|
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Cash and Cash Equivalents
|
|
Short-Term Marketable Securities
|
|
Long-Term Marketable Securities
|
||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||
Cash
|
$
|
659
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
659
|
|
|
$
|
659
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Bank and time deposits
|
943
|
|
|
—
|
|
|
—
|
|
|
943
|
|
|
943
|
|
|
—
|
|
|
—
|
|
|||||||
Money market funds
|
83
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|
83
|
|
|
—
|
|
|
—
|
|
|||||||
U.S. treasury and agency obligations
|
1,434
|
|
|
—
|
|
|
(1
|
)
|
|
1,433
|
|
|
12
|
|
|
192
|
|
|
1,229
|
|
|||||||
Subtotal
|
2,460
|
|
|
—
|
|
|
(1
|
)
|
|
2,459
|
|
|
1,038
|
|
|
192
|
|
|
1,229
|
|
|||||||
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Commercial paper
|
800
|
|
|
—
|
|
|
—
|
|
|
800
|
|
|
798
|
|
|
2
|
|
|
—
|
|
|||||||
Corporate bonds
|
1,931
|
|
|
1
|
|
|
(2
|
)
|
|
1,930
|
|
|
50
|
|
|
859
|
|
|
1,021
|
|
|||||||
Asset-backed securities and other
|
141
|
|
|
—
|
|
|
—
|
|
|
141
|
|
|
—
|
|
|
8
|
|
|
133
|
|
|||||||
Subtotal
|
2,872
|
|
|
1
|
|
|
(2
|
)
|
|
2,871
|
|
|
848
|
|
|
869
|
|
|
1,154
|
|
|||||||
Level 3:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Level 3: None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total
|
$
|
5,991
|
|
|
$
|
1
|
|
|
$
|
(3
|
)
|
|
$
|
5,989
|
|
|
$
|
2,545
|
|
|
$
|
1,061
|
|
|
$
|
2,383
|
|
4.
|
Income Taxes
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions, except percentages)
|
||||||||||||||
Provision for income taxes
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
17
|
|
|
$
|
5
|
|
Effective tax rates
|
2.0
|
%
|
|
200.0
|
%
|
|
2.8
|
%
|
|
3.0
|
%
|
5.
|
Debt and Credit Facility
|
Date
|
|
Maturity
|
|
Interest
|
|
Effective
|
|
Issuance
|
|
June 30,
|
|
December 31,
|
|||||||
Issued
|
|
Date
|
|
Rate
|
|
Yield
|
|
Price
|
|
2015
|
|
2014
|
|||||||
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|||||||||
November 2011
|
|
November 2018
|
|
2.700
|
%
|
|
2.762
|
%
|
|
99.609
|
%
|
|
$
|
500
|
|
|
$
|
500
|
|
August 2012
|
|
August 2022
|
|
2.500
|
|
|
2.585
|
|
|
99.255
|
|
|
500
|
|
|
500
|
|
||
July 2014
|
|
August 2024
|
|
3.500
|
|
|
3.546
|
|
|
99.615
|
|
|
350
|
|
|
350
|
|
||
July 2014
|
|
August 2034
|
|
4.500
|
|
|
4.546
|
|
|
99.400
|
|
|
250
|
|
|
250
|
|
||
|
|
|
|
|
|
|
|
|
|
1,600
|
|
|
1,600
|
|
|||||
|
|
Unaccreted discount
|
|
(6
|
)
|
|
(7
|
)
|
|||||||||||
|
|
Long-term debt
|
|
$
|
1,594
|
|
|
$
|
1,593
|
|
6.
|
Shareholders’ Equity
|
7.
|
Employee Benefit Plans
|
|
Restricted Stock Units
Outstanding
|
|||||
|
Number of
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
per Share
|
|||
|
(In millions, except per share data)
|
|||||
Balance at December 31, 2014
|
20
|
|
|
$
|
32.38
|
|
Restricted stock units granted
|
7
|
|
|
42.61
|
|
|
Restricted stock units cancelled
|
(1
|
)
|
|
33.14
|
|
|
Restricted stock units vested
|
(5
|
)
|
|
34.10
|
|
|
Balance at June 30, 2015
|
21
|
|
|
$
|
35.25
|
|
|
Options Outstanding
|
|||||
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
per Share
|
|||
|
(In millions, except per share data)
|
|||||
Balance at December 31, 2014
|
20
|
|
|
$
|
33.84
|
|
Options exercised
|
(12
|
)
|
|
34.44
|
|
|
Balance at June 30, 2015
|
8
|
|
|
$
|
32.90
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Cost of revenue
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
9
|
|
|
$
|
11
|
|
Research and development
|
56
|
|
|
80
|
|
|
116
|
|
|
164
|
|
||||
Selling, general and administrative
|
26
|
|
|
28
|
|
|
51
|
|
|
58
|
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Total
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Unearned stock-based compensation
|
$
|
168
|
|
|
$
|
252
|
|
|
$
|
163
|
|
|
$
|
80
|
|
|
$
|
11
|
|
|
$
|
674
|
|
8.
|
Commitments and Contingencies
|
9.
|
Goodwill and Purchased Intangible Assets
|
|
Reportable Segments
|
|
|
|
|
||||||||||
|
Broadband and Connectivity
|
|
Infrastructure and Networking
|
|
Foreign
Currency
|
|
Consolidated
|
||||||||
|
(In millions)
|
||||||||||||||
Goodwill
|
$
|
1,802
|
|
|
$
|
3,768
|
|
|
$
|
(31
|
)
|
|
$
|
5,539
|
|
Accumulated impairment losses
|
(543
|
)
|
|
(1,286
|
)
|
|
—
|
|
|
(1,829
|
)
|
||||
Goodwill at December 31, 2014
|
1,259
|
|
|
2,482
|
|
|
(31
|
)
|
|
3,710
|
|
||||
Effects of foreign currency translation
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
||||
Goodwill at June 30, 2015
|
$
|
1,259
|
|
|
$
|
2,482
|
|
|
$
|
(24
|
)
|
|
$
|
3,717
|
|
|
June 30, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Developed technology
|
$
|
928
|
|
|
$
|
(489
|
)
|
|
$
|
439
|
|
|
$
|
1,250
|
|
|
$
|
(619
|
)
|
|
$
|
631
|
|
In-process research and development
|
11
|
|
|
—
|
|
|
11
|
|
|
19
|
|
|
—
|
|
|
19
|
|
||||||
Customer relationships
|
177
|
|
|
(165
|
)
|
|
12
|
|
|
177
|
|
|
(164
|
)
|
|
13
|
|
||||||
Other
|
33
|
|
|
(33
|
)
|
|
—
|
|
|
32
|
|
|
(31
|
)
|
|
1
|
|
||||||
|
$
|
1,149
|
|
|
$
|
(687
|
)
|
|
$
|
462
|
|
|
$
|
1,478
|
|
|
$
|
(814
|
)
|
|
$
|
664
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Cost of revenue
|
$
|
31
|
|
|
$
|
47
|
|
|
$
|
67
|
|
|
$
|
97
|
|
Other operating expenses
|
2
|
|
|
9
|
|
|
3
|
|
|
18
|
|
||||
|
$
|
33
|
|
|
$
|
56
|
|
|
$
|
70
|
|
|
$
|
115
|
|
|
Purchased Intangible Asset Amortization by Year
|
||||||||||||||||||||||||||
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||
Cost of revenue
|
$
|
63
|
|
|
$
|
94
|
|
|
$
|
75
|
|
|
$
|
59
|
|
|
$
|
45
|
|
|
$
|
114
|
|
|
$
|
450
|
|
Other operating expenses
|
2
|
|
|
3
|
|
|
2
|
|
|
3
|
|
|
2
|
|
|
—
|
|
|
12
|
|
|||||||
|
$
|
65
|
|
|
$
|
97
|
|
|
$
|
77
|
|
|
$
|
62
|
|
|
$
|
47
|
|
|
$
|
114
|
|
|
$
|
462
|
|
10.
|
Exit from Cellular Baseband Business
|
|
Six Months Ended June 30, 2015
|
||
|
(In millions)
|
||
Balance at December 31, 2014
|
$
|
33
|
|
Charged to expense
|
11
|
|
|
Cash payments
|
(31
|
)
|
|
Balance at June 30, 2015
|
$
|
13
|
|
11.
|
Reportable Segments, Significant Customer and Geographical Information
|
•
|
the integrated circuits marketed by each of our reportable segments are sold to one type of customer: manufacturers of wired and wireless communications equipment, which incorporate our integrated circuits into their electronic products;
|
•
|
the integrated circuits sold by each of our reportable segments use the same standard CMOS manufacturing processes;
|
•
|
all of our integrated circuits are manufactured, assembled and tested using the same or similar group of independent, third-party subcontractors; and
|
•
|
all of our integrated circuits are sold through a centralized sales force and common wholesale distributors.
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Broadband and Connectivity
|
|
Infrastructure and Networking
|
|
Total Reportable Segments
|
|
Cellular Baseband
|
|
All Other
|
|
Consolidated
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Three Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net revenue
|
$
|
1,423
|
|
|
$
|
669
|
|
|
$
|
2,092
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
2,096
|
|
Operating income (loss)
|
268
|
|
|
194
|
|
|
462
|
|
|
—
|
|
|
(60
|
)
|
|
402
|
|
||||||
Three Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net revenue
|
$
|
1,302
|
|
|
$
|
655
|
|
|
1,957
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
2,041
|
|
|
Operating income (loss)
|
243
|
|
|
206
|
|
|
449
|
|
|
(151
|
)
|
|
(284
|
)
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Broadband and Connectivity
|
|
Infrastructure and Networking
|
|
Total Reportable Segments
|
|
Cellular Baseband
|
|
All Other
|
|
Consolidated
|
|||||||||||
|
(In millions)
|
|||||||||||||||||||||
Six Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net revenue
|
$
|
2,831
|
|
|
$
|
1,300
|
|
|
4,131
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
4,154
|
|
Operating income (loss)
|
509
|
|
|
361
|
|
|
870
|
|
|
(7
|
)
|
|
(238
|
)
|
|
625
|
|
|||||
Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net revenue
|
$
|
2,548
|
|
|
$
|
1,249
|
|
|
3,797
|
|
|
$
|
228
|
|
|
$
|
—
|
|
|
$
|
4,025
|
|
Operating income (loss)
|
427
|
|
|
355
|
|
|
782
|
|
|
(290
|
)
|
|
(308
|
)
|
|
184
|
|
Included In All Other Category:
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
(In millions)
|
||||||||||||||
Amortization of purchased intangible assets
|
$
|
33
|
|
|
$
|
56
|
|
|
$
|
70
|
|
|
$
|
115
|
|
Inventory charges related to the exit of the cellular baseband business
|
(1
|
)
|
|
34
|
|
|
(3
|
)
|
|
34
|
|
||||
Impairments of long-lived assets
|
—
|
|
|
165
|
|
|
143
|
|
|
190
|
|
||||
Settlement costs
|
1
|
|
|
16
|
|
|
1
|
|
|
18
|
|
||||
Restructuring costs, net
|
4
|
|
|
23
|
|
|
11
|
|
|
28
|
|
||||
Other charges (gains), net
|
22
|
|
|
(7
|
)
|
|
18
|
|
|
(59
|
)
|
||||
Miscellaneous corporate allocation variances
|
1
|
|
|
(3
|
)
|
|
(2
|
)
|
|
(18
|
)
|
||||
Total other operating costs and expenses
|
$
|
60
|
|
|
$
|
284
|
|
|
$
|
238
|
|
|
$
|
308
|
|
Total operating loss for the “All Other” category
|
$
|
(60
|
)
|
|
$
|
(284
|
)
|
|
$
|
(238
|
)
|
|
$
|
(308
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Two largest customers
|
25.0
|
%
|
|
24.4
|
%
|
|
25.7
|
%
|
|
27.3
|
%
|
Five largest customers as a group
|
41.3
|
|
|
43.0
|
|
|
41.3
|
|
|
44.2
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Hong Kong
|
36.4
|
%
|
|
32.5
|
%
|
|
34.5
|
%
|
|
30.0
|
%
|
China (exclusive of Hong Kong)
|
25.3
|
|
|
22.1
|
|
|
24.7
|
|
|
22.4
|
|
Singapore, Taiwan, Thailand and Japan
|
20.8
|
|
|
29.4
|
|
|
23.9
|
|
|
32.1
|
|
United States
|
5.0
|
|
|
4.9
|
|
|
4.8
|
|
|
4.6
|
|
Europe
|
1.7
|
|
|
2.0
|
|
|
1.8
|
|
|
2.0
|
|
Other
|
10.8
|
|
|
9.1
|
|
|
10.3
|
|
|
8.9
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
B-Connected Blog (
blog.broadcom.com
)
|
•
|
Broadcom's Twitter feed (
www.twitter.com/Broadcom
)
|
•
|
Broadcom's Facebook page (
www.facebook.com/Broadcom
)
|
•
|
Our cash and cash equivalents and marketable securities were
$6.35 billion
at
June 30, 2015
, compared with
$5.99 billion
at
December 31, 2014
.
|
•
|
Cash flow from operations generated
$777 million
during the
six months ended June 30, 2015
, as compared to
$831 million
in the
six months ended June 30, 2014
.
|
•
|
We repurchased
10.4 million
shares of our Class A common stock at a weighted average price of $
44.40
in the
six months ended June 30, 2015
. In connection with the Avago Agreement, we agreed to discontinue future share repurchases, under these programs.
|
•
|
We paid
$168 million
in dividends to holders of our Class A and Class B common stock in the
six months ended June 30, 2015
.
|
•
|
In the three months ended March 31, 2015, we recorded impairment charges related to our knowledge-based processors of $135 million, related to our acquisition of NetLogic Microsystems, Inc., or NetLogic.
|
•
|
In March 2015, we paid
$156 million
upon close of escrow for the purchase of land, which we are using to construct a new corporate campus in Orange County, California, totaling up to 2 million square feet in order to meet the requirements projected in our long-term business plan. This payment included $110 million for the purchase of the land and $46 million for prepaid taxes and refundable deposits.
|
•
|
We recorded acquisition-related costs of approximately
$22 million
, primarily for outside legal and financial advisory fees associated with the pending acquisition of Broadcom by Avago in the three and
six months ended June 30, 2015
.
|
|
Reportable Segments
|
|
Total Reportable Segments
|
|
|
|
|
|
|
||||||||||||||
|
Broadband and Connectivity
|
|
Infrastructure and Networking
|
|
|
Cellular Baseband
|
|
All Other
|
|
Consolidated
|
|||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Three Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net revenue
|
$
|
1,423
|
|
|
$
|
669
|
|
|
$
|
2,092
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
2,096
|
|
Operating income (loss)
|
268
|
|
|
194
|
|
|
462
|
|
|
—
|
|
|
(60
|
)
|
|
402
|
|
||||||
Operating margin
|
18.8
|
%
|
|
29.0
|
%
|
|
22.1
|
%
|
|
—
|
%
|
|
|
|
19.2
|
%
|
|||||||
Three Months Ended March 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net revenue
|
$
|
1,408
|
|
|
$
|
631
|
|
|
$
|
2,039
|
|
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
2,058
|
|
Operating income (loss)
|
241
|
|
|
167
|
|
|
408
|
|
|
(7
|
)
|
|
(178
|
)
|
|
223
|
|
||||||
Operating margin
|
17.1
|
%
|
|
26.5
|
%
|
|
20.0
|
%
|
|
(36.8
|
)%
|
|
|
|
10.8
|
%
|
|||||||
Three Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net revenue
|
$
|
1,302
|
|
|
$
|
655
|
|
|
1,957
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
2,041
|
|
|
Operating income (loss)
|
243
|
|
|
206
|
|
|
449
|
|
|
(151
|
)
|
|
(284
|
)
|
|
14
|
|
||||||
Operating margin
|
18.7
|
%
|
|
31.5
|
%
|
|
22.9
|
%
|
|
(179.8
|
)%
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Reportable Segments
|
|
Total Reportable Segments
|
|
|
|
|
|
|
|||||||||||||
|
Broadband and Connectivity
|
|
Infrastructure and Networking
|
|
|
Cellular Baseband
|
|
All Other
|
|
Consolidated
|
||||||||||||
|
(In millions)
|
|||||||||||||||||||||
Six Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net revenue
|
$
|
2,831
|
|
|
$
|
1,300
|
|
|
4,131
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
4,154
|
|
Operating income (loss)
|
509
|
|
|
361
|
|
|
870
|
|
|
(7
|
)
|
|
(238
|
)
|
|
625
|
|
|||||
Operating margin
|
18.0
|
%
|
|
27.8
|
%
|
|
21.1
|
%
|
|
(30.4
|
)%
|
|
|
|
15.0
|
%
|
||||||
Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net revenue
|
$
|
2,548
|
|
|
$
|
1,249
|
|
|
3,797
|
|
|
$
|
228
|
|
|
$
|
—
|
|
|
$
|
4,025
|
|
Operating income (loss)
|
427
|
|
|
355
|
|
|
782
|
|
|
(290
|
)
|
|
(308
|
)
|
|
184
|
|
|||||
Operating margin
|
16.8
|
%
|
|
28.4
|
%
|
|
20.6
|
%
|
|
(127.2
|
)%
|
|
|
|
4.6
|
%
|
|
Three Months Ended
|
|
Quarter over Quarter
|
|
Year over Year
|
||||||||||||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||||
Broadband and Connectivity
|
$
|
1,423
|
|
|
$
|
1,408
|
|
|
$
|
1,302
|
|
|
$
|
15
|
|
|
1.1
|
%
|
|
$
|
121
|
|
|
9.3
|
%
|
Infrastructure and Networking
|
669
|
|
|
631
|
|
|
655
|
|
|
38
|
|
|
6.0
|
|
|
14
|
|
|
2.1
|
|
|||||
Total reportable segments
|
2,092
|
|
|
2,039
|
|
|
1,957
|
|
|
53
|
|
|
2.6
|
|
|
135
|
|
|
6.9
|
|
|||||
Cellular Baseband
|
4
|
|
|
19
|
|
|
84
|
|
|
(15
|
)
|
|
(78.9
|
)
|
|
(80
|
)
|
|
(95.2
|
)
|
|||||
Total net revenue
|
$
|
2,096
|
|
|
$
|
2,058
|
|
|
$
|
2,041
|
|
|
$
|
38
|
|
|
1.8
|
|
|
$
|
55
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|||||||
|
Six Months Ended
|
|
Year over Year
|
|||||||||||
|
June 30, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|||||||
|
(In millions, except percentages)
|
|||||||||||||
Broadband and Connectivity
|
$
|
2,831
|
|
|
$
|
2,548
|
|
|
$
|
283
|
|
|
11.1
|
%
|
Infrastructure and Networking
|
1,300
|
|
|
1,249
|
|
|
51
|
|
|
4.1
|
|
|||
Total reportable segments
|
4,131
|
|
|
3,797
|
|
|
334
|
|
|
8.8
|
|
|||
Cellular Baseband
|
23
|
|
|
228
|
|
|
(205
|
)
|
|
(89.9
|
)
|
|||
Total net revenue
|
$
|
4,154
|
|
|
$
|
4,025
|
|
|
$
|
129
|
|
|
3.2
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
June 30, 2015
|
|
June 30, 2014
|
|||||
|
(as a % of net revenue)
|
|||||||||||||
Broadband and Connectivity
|
67.9
|
%
|
|
68.4
|
%
|
|
63.8
|
%
|
|
68.1
|
%
|
|
63.3
|
%
|
Infrastructure and Networking
|
31.9
|
|
|
30.7
|
|
|
32.1
|
|
|
31.3
|
|
|
31.0
|
|
Total reportable segments
|
99.8
|
|
|
99.1
|
|
|
95.9
|
|
|
99.4
|
|
|
94.3
|
|
Cellular Baseband
|
0.2
|
|
|
0.9
|
|
|
4.1
|
|
|
0.6
|
|
|
5.7
|
|
Total net revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Two largest customers
|
25.0
|
%
|
|
24.4
|
%
|
|
25.7
|
%
|
|
27.3
|
%
|
Five largest customers as a group
|
41.3
|
|
|
43.0
|
|
|
41.3
|
|
|
44.2
|
|
|
Three Months Ended
|
|
Quarter over Quarter
|
|
Year over Year
|
||||||||||||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||||
Net revenue
|
$
|
2,096
|
|
|
$
|
2,058
|
|
|
$
|
2,041
|
|
|
$
|
38
|
|
|
1.8
|
%
|
|
$
|
55
|
|
|
2.7
|
%
|
Cost of revenue
|
939
|
|
|
972
|
|
|
1,005
|
|
|
(33
|
)
|
|
(3.4
|
)
|
|
(66
|
)
|
|
(6.6
|
)
|
|||||
Gross profit
|
$
|
1,157
|
|
|
$
|
1,086
|
|
|
$
|
1,036
|
|
|
$
|
71
|
|
|
6.5
|
|
|
$
|
121
|
|
|
11.7
|
|
Gross margin
|
55.2
|
%
|
|
52.8
|
%
|
|
50.8
|
%
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
Year over Year
|
|||||||||||
|
June 30, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|||||||
|
(In millions, except percentages)
|
|||||||||||||
Net revenue
|
$
|
4,154
|
|
|
$
|
4,025
|
|
|
$
|
129
|
|
|
3.2
|
%
|
Cost of revenue
|
1,911
|
|
|
2,009
|
|
|
(98
|
)
|
|
(4.9
|
)
|
|||
Gross profit
|
$
|
2,243
|
|
|
$
|
2,016
|
|
|
$
|
227
|
|
|
11.3
|
|
Gross margin
|
54.0
|
%
|
|
50.1
|
%
|
|
|
|
|
|
Three Months Ended
|
|
Quarter over Quarter
|
|
Year over Year
|
||||||||||||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||||
Salaries and benefits
|
$
|
395
|
|
|
$
|
380
|
|
|
$
|
456
|
|
|
$
|
15
|
|
|
3.9
|
%
|
|
$
|
(61
|
)
|
|
(13.4
|
)%
|
Development and design costs
|
73
|
|
|
87
|
|
|
86
|
|
|
(14
|
)
|
|
(16.1
|
)
|
|
(13
|
)
|
|
(15.1
|
)
|
|||||
Other
|
70
|
|
|
72
|
|
|
92
|
|
|
(2
|
)
|
|
(2.8
|
)
|
|
(22
|
)
|
|
(23.9
|
)
|
|||||
Research and development
|
$
|
538
|
|
|
$
|
539
|
|
|
$
|
634
|
|
|
$
|
(1
|
)
|
|
(0.2
|
)
|
|
$
|
(96
|
)
|
|
(15.1
|
)
|
(as a % of net revenue)
|
25.7
|
%
|
|
26.2
|
%
|
|
31.1
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Employees
|
7,850
|
|
|
7,800
|
|
|
9,750
|
|
|
50
|
|
|
0.6
|
|
|
(1,900
|
)
|
|
(19.5
|
)
|
|
Six Months Ended
|
|
Year over Year
|
|||||||||||
|
June 30, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|||||||
|
(In millions, except percentages)
|
|||||||||||||
Salaries and benefits
|
$
|
775
|
|
|
$
|
912
|
|
|
$
|
(137
|
)
|
|
(15.0
|
)%
|
Development and design costs
|
160
|
|
|
174
|
|
|
(14
|
)
|
|
(8.0
|
)
|
|||
Other
|
142
|
|
|
184
|
|
|
(42
|
)
|
|
(22.8
|
)
|
|||
Research and development
|
$
|
1,077
|
|
|
$
|
1,270
|
|
|
$
|
(193
|
)
|
|
(15.2
|
)
|
(as a % of net revenue)
|
25.9
|
%
|
|
31.6
|
%
|
|
|
|
|
|
Three Months Ended
|
|
Quarter over Quarter
|
|
Year over Year
|
||||||||||||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||||
Salaries and benefits
|
$
|
136
|
|
|
$
|
120
|
|
|
$
|
123
|
|
|
$
|
16
|
|
|
13.3
|
%
|
|
$
|
13
|
|
|
10.6
|
%
|
Legal and accounting fees
|
16
|
|
|
17
|
|
|
19
|
|
|
(1
|
)
|
|
(5.9
|
)
|
|
(3
|
)
|
|
(15.8
|
)
|
|||||
Other
|
36
|
|
|
40
|
|
|
40
|
|
|
(4
|
)
|
|
(10.0
|
)
|
|
(4
|
)
|
|
(10.0
|
)
|
|||||
Selling, general and administrative
|
$
|
188
|
|
|
$
|
177
|
|
|
$
|
182
|
|
|
$
|
11
|
|
|
6.2
|
|
|
$
|
6
|
|
|
3.3
|
|
(as a % of net revenue)
|
9.0
|
%
|
|
8.6
|
%
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|||||||||
Employees
|
1,950
|
|
|
1,950
|
|
|
2,050
|
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
(4.9
|
)
|
|
Six Months Ended
|
|
Year over Year
|
|||||||||||
|
June 30, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|||||||
|
(In millions, except percentages)
|
|||||||||||||
Salaries and benefits
|
$
|
256
|
|
|
$
|
244
|
|
|
$
|
12
|
|
|
4.9
|
%
|
Legal and accounting fees
|
33
|
|
|
40
|
|
|
(7
|
)
|
|
(17.5
|
)
|
|||
Other
|
76
|
|
|
83
|
|
|
(7
|
)
|
|
(8.4
|
)
|
|||
Selling, general and administrative
|
$
|
365
|
|
|
$
|
367
|
|
|
$
|
(2
|
)
|
|
(0.5
|
)
|
(as a % of net revenue)
|
8.8
|
%
|
|
9.1
|
%
|
|
|
|
|
|
Three Months Ended
|
|
Quarter over Quarter
|
|
Year over Year
|
||||||||||||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||||
Cost of revenue
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
(1
|
)
|
|
(20.0
|
)%
|
|
$
|
(1
|
)
|
|
(20.0
|
)%
|
Research and development
|
56
|
|
|
60
|
|
|
80
|
|
|
(4
|
)
|
|
(6.7
|
)
|
|
(24
|
)
|
|
(30.0
|
)
|
|||||
Selling, general and administrative
|
26
|
|
|
25
|
|
|
28
|
|
|
1
|
|
|
4.0
|
|
|
(2
|
)
|
|
(7.1
|
)
|
|||||
Stock-based compensation
|
$
|
86
|
|
|
$
|
90
|
|
|
$
|
113
|
|
|
$
|
(4
|
)
|
|
(4.4
|
)
|
|
$
|
(27
|
)
|
|
(23.9
|
)
|
(as a % of net revenue)
|
4.1
|
%
|
|
4.4
|
%
|
|
5.5
|
%
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
Year over Year
|
|||||||||||
|
June 30, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|||||||
|
(In millions, except percentages)
|
|||||||||||||
Cost of revenue
|
$
|
9
|
|
|
$
|
11
|
|
|
$
|
(2
|
)
|
|
(18.2
|
)%
|
Research and development
|
116
|
|
|
164
|
|
|
(48
|
)
|
|
(29.3
|
)
|
|||
Selling, general and administrative
|
51
|
|
|
58
|
|
|
(7
|
)
|
|
(12.1
|
)
|
|||
Stock-based compensation
|
$
|
176
|
|
|
$
|
233
|
|
|
$
|
(57
|
)
|
|
(24.5
|
)
|
(as a % of net revenue)
|
4.2
|
%
|
|
5.8
|
%
|
|
|
|
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Total
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Unearned stock-based compensation
|
$
|
168
|
|
|
$
|
252
|
|
|
$
|
163
|
|
|
$
|
80
|
|
|
$
|
11
|
|
|
$
|
674
|
|
|
Three Months Ended
|
|
Quarter over Quarter
|
|
Year over Year
|
||||||||||||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|
$ Change
|
|
% Change
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||||
Cost of revenue
|
$
|
31
|
|
|
$
|
36
|
|
|
$
|
47
|
|
|
$
|
(5
|
)
|
|
(13.9
|
)%
|
|
$
|
(16
|
)
|
|
(34.0
|
)%
|
Other operating expenses
|
2
|
|
|
1
|
|
|
9
|
|
|
1
|
|
|
100.0
|
|
|
(7
|
)
|
|
(77.8
|
)
|
|||||
|
$
|
33
|
|
|
$
|
37
|
|
|
$
|
56
|
|
|
$
|
(4
|
)
|
|
(10.8
|
)
|
|
$
|
(23
|
)
|
|
(41.1
|
)
|
|
Six Months Ended
|
|
Year over Year
|
|||||||||||
|
June 30, 2015
|
|
June 30, 2014
|
|
$ Change
|
|
% Change
|
|||||||
|
(In millions, except percentages)
|
|||||||||||||
Cost of revenue
|
$
|
67
|
|
|
$
|
97
|
|
|
$
|
(30
|
)
|
|
(30.9
|
)%
|
Other operating expenses
|
3
|
|
|
18
|
|
|
(15
|
)
|
|
(83.3
|
)
|
|||
|
$
|
70
|
|
|
$
|
115
|
|
|
$
|
(45
|
)
|
|
(39.1
|
)
|
|
Purchased Intangible Asset Amortization by Year
|
||||||||||||||||||||||||||
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
||||||||||||||
|
(In millions)
|
||||||||||||||||||||||||||
Cost of revenue
|
$
|
63
|
|
|
$
|
94
|
|
|
$
|
75
|
|
|
$
|
59
|
|
|
$
|
45
|
|
|
$
|
114
|
|
|
$
|
450
|
|
Other operating expenses
|
2
|
|
|
3
|
|
|
2
|
|
|
3
|
|
|
2
|
|
|
—
|
|
|
12
|
|
|||||||
|
$
|
65
|
|
|
$
|
97
|
|
|
$
|
77
|
|
|
$
|
62
|
|
|
$
|
47
|
|
|
$
|
114
|
|
|
$
|
462
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||
|
June 30, 2015
|
|
March 31, 2015
|
|
June 30, 2014
|
|
June 30, 2015
|
|
June 30, 2014
|
||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||
Provision for income taxes
|
$
|
8
|
|
|
$
|
9
|
|
|
$
|
2
|
|
|
$
|
17
|
|
|
$
|
5
|
|
Effective tax rates
|
2.0
|
%
|
|
4.1
|
%
|
|
200.0
|
%
|
|
2.8
|
%
|
|
3.0
|
%
|
|
June 30,
2015 |
|
December 31,
2014 |
|
$ Change
|
||||||
|
(In millions)
|
||||||||||
Working capital
|
$
|
3,317
|
|
|
$
|
3,522
|
|
|
$
|
(205
|
)
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
1,976
|
|
|
$
|
2,545
|
|
|
$
|
(569
|
)
|
Short-term marketable securities
|
1,208
|
|
|
1,061
|
|
|
147
|
|
|||
Long-term marketable securities
|
3,161
|
|
|
2,383
|
|
|
778
|
|
|||
Total cash and cash equivalents and marketable securities
|
$
|
6,345
|
|
|
$
|
5,989
|
|
|
$
|
356
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2015
|
|
2014
|
||||
|
(In millions)
|
||||||
Net cash provided by operating activities
|
$
|
777
|
|
|
$
|
831
|
|
Net cash used in investing activities
|
(1,112
|
)
|
|
(17
|
)
|
||
Net cash used in financing activities
|
(234
|
)
|
|
(107
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
(569
|
)
|
|
707
|
|
||
Cash and cash equivalents at beginning of period
|
2,545
|
|
|
1,657
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,976
|
|
|
$
|
2,364
|
|
Date
|
|
Maturity
|
|
Interest
|
|
Effective
|
|
Issuance
|
|
June 30,
|
|
December 31,
|
|||||||
Issued
|
|
Date
|
|
Rate
|
|
Yield
|
|
Price
|
|
2015
|
|
2014
|
|||||||
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|||||||||
November 2011
|
|
November 2018
|
|
2.700
|
%
|
|
2.762
|
%
|
|
99.609
|
%
|
|
$
|
500
|
|
|
$
|
500
|
|
August 2012
|
|
August 2022
|
|
2.500
|
|
|
2.585
|
|
|
99.255
|
|
|
500
|
|
|
500
|
|
||
July 2014
|
|
August 2024
|
|
3.500
|
|
|
3.546
|
|
|
99.615
|
|
|
350
|
|
|
350
|
|
||
July 2014
|
|
August 2034
|
|
4.500
|
|
|
4.546
|
|
|
99.400
|
|
|
250
|
|
|
250
|
|
||
|
|
|
|
|
|
|
|
|
|
1,600
|
|
|
1,600
|
|
|||||
|
|
Unaccreted discount
|
|
(6
|
)
|
|
(7
|
)
|
|||||||||||
|
|
Long-term debt
|
|
$
|
1,594
|
|
|
$
|
1,593
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
changes in economic conditions in the markets we address, including the continuing volatility in the technology sector and semiconductor industry;
|
•
|
our dependence on a few significant customers and/or design wins for a substantial portion of our revenue;
|
•
|
our exit or entry into various markets and our ability to align our resources to areas of strategic focus;
|
•
|
changes in customer product needs and market acceptance of our products;
|
•
|
seasonality in sales of consumer and enterprise products in which our products are incorporated;
|
•
|
timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;
|
•
|
competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products;
|
•
|
goodwill and other purchased intangible impairment charges;
|
•
|
the impact of a significant natural disaster, such as an earthquake, severe weather, tsunami or other flooding, or a nuclear crisis, as well as interruptions or shortages in the supply of utilities such as water and electricity, in a key location such as our corporate headquarters or our Northern California facilities, both of which are located near major earthquake fault lines, in our Singapore distribution center or in a key location of one of our suppliers, foundries or customers;
|
•
|
the impact of enterprise system failures or network disruptions, the lack of system redundancies, and the potential failure of our disaster recovery planning to cover various unanticipated occurrences; and
|
•
|
the impact of tax examinations.
|
•
|
the pendency and outcome of any legal proceedings that have been or may be instituted against us, our directors and others relating to the transactions contemplated by the Avago Agreement;
|
•
|
potential adverse effects on our relationships with our current suppliers and other business partners, or those with which we are seeking to establish business relationships;
|
•
|
the restrictions imposed on our business and operations pursuant to certain covenants set forth in the Avago Agreement, which may prevent us from pursuing certain opportunities without Avago’s approval;
|
•
|
that we may forego opportunities we might otherwise pursue absent the Avago Agreement;
|
•
|
potential adverse effects on our ability to attract, recruit, retain and motivate current and prospective employees who may be uncertain about their future roles and relationships with us following the completion of the merger; and
|
•
|
the diversion of our employees’ and management’s attention due to activities related to the transactions contemplated by the Avago Agreement.
|
•
|
we could be required to pay a termination fee of up to $1 billion to Avago under certain circumstances as described in the Avago Agreement;
|
•
|
we could be required to pay a termination fee of approximately $333 million to Avago in the event our shareholders fail to approve the Transaction;
|
•
|
we would have incurred significant costs in connection with the acquisition that we would be unable to recover;
|
•
|
we may be subject to legal proceedings related to the acquisition;
|
•
|
the failure of the acquisition to be consummated may result in negative publicity and a negative impression of us in the investment community;
|
•
|
any disruptions to our business resulting from the announcement and pendency of the acquisition, including any adverse changes in our relationships with our customers, vendors and employees, may continue or intensify in the event the merger is not consummated;
|
•
|
we may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures; and
|
•
|
we may experience a departure of employees.
|
•
|
agreements with our customers typically do not require them to purchase a minimum quantity of our products; and
|
•
|
our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty.
|
•
|
political, social and economic instability;
|
•
|
exposure to different business practices and legal and compliance standards;
|
•
|
continuation of overseas conflicts and the risk of terrorist attacks and resulting heightened security;
|
•
|
the imposition of governmental controls and restrictions and unexpected changes in regulatory requirements;
|
•
|
nationalization of business and blocking of cash flows;
|
•
|
logistical delays or disruptions;
|
•
|
changes in taxation and tariffs; and
|
•
|
difficulties in staffing and managing international operations.
|
•
|
a lack of guaranteed supply of wafers and other components and potential higher wafer and component prices due to supply constraints;
|
•
|
the limited availability of, or potential delays in obtaining access to, key process technologies; and
|
•
|
the location of foundries and other suppliers in regions that are subject to earthquakes, tsunamis and other natural disasters.
|
•
|
use of cash to consummate various transactions;
|
•
|
our views on potential future capital requirements for investments in acquisitions and the funding of our research and development;
|
•
|
changes in federal and state income tax laws or corporate laws; and
|
•
|
changes to our business model.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
|
|
|
|
|
|
|
||||||
Period
|
|
Total Number of Shares Purchased
|
|
Average Price per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans
|
|
Approximate Dollar Value of Shares That May yet be Purchased under the Plans
|
||||||
|
|
(In millions, except per share data)
|
||||||||||||
April 2015
|
|
1.6
|
|
|
$
|
44.68
|
|
|
1.6
|
|
|
|
||
May 2015
|
|
0.8
|
|
|
45.03
|
|
|
0.8
|
|
|
|
|||
June 2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||
Total
|
|
2.4
|
|
|
$
|
44.79
|
|
|
2.4
|
|
|
$
|
—
|
|
Item 3.
|
Defaults upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
2.1*
|
|
Agreement and Plan of Merger, dated as of May 28, 2015, by and among the Company, Avago Technologies Limited, Pavonia Limited, Safari Cayman L.P., Avago Technologies Cayman Holdings Ltd., Avago Technologies Cayman Finance Limited, Buffalo CS Merger Sub, Inc. and Buffalo UT Merger Sub, Inc.
|
|
|
|
10.1**
|
|
Support Agreement, dated as of May 28, 2015, by and among the Company, Avago Technologies Limited, Pavonia Limited, Henry T. Nicholas III, Ph.D. as trustee of the Nicholas Technology Holding Trust, Nicholas Investment Holdings, LLC, Henry T. Nicholas III, Ph.D., as custodian for Brett R. Nicholas, UTMA/CA, Henry T. Nicholas III, Ph.D., as custodian for Mathew C. Nicholas, UTMA/CA, and Henry T. Nicholas III, Ph.D., as custodian for Shelby V. Nicholas, UTMA/CA
|
|
|
|
10.2***
|
|
Support Agreement, dated as of May 28, 2015, by and among the Company, Avago Technologies Limited, Pavonia Limited, Henry Samueli, Ph.D., H&S Investments I, L.P., HS Management, L.P., HS Portfolio L.P., H&S Portfolio II, L.P. and H&S Ventures LLC
|
|
|
|
10.3 **** †
|
|
Form of Amendment to the Letter Agreement, dated August 9, 2010, between the Company and Scott McGregor and to the Letter Agreements, dated August 9, 2010 and for the Change in Control Severance Benefit Program for each of Eric K. Brandt, Arthur Chong, Cindy Fiorillo, Michael Hurlston, Neil Kim, Daniel A. Marotta, Nancy Phillips, and Rajiv Ramaswami
|
|
|
|
10.4 †
|
|
Amendment to Restricted Stock Units Award Program
|
|
|
|
10.5 †
|
|
Amendment to Performance Bonus Plan
|
|
|
|
31.1
|
|
Certifications of the Chief Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Certifications of the Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32
|
|
Certifications of the Chief Executive Officer and Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and furnished herewith pursuant to SEC Release No. 33-8238
|
|
|
|
101. INS
|
|
XBRL Instance Document
|
|
|
|
101. SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101. CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101. DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
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101. LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101. PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Exhibit 2.1 is incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on May 29, 2015. Certain schedules and exhibits were omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
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**
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Exhibit 10.1 is incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed on May 29, 2015.
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***
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Exhibit 10.2 is incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed on May 29, 2015.
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****
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Exhibit 10.3 is incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K filed on May 29, 2015.
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†
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A contract, compensatory plan or arrangement in which directors or executive officers are eligible to participate.
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BROADCOM CORPORATION,
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a California corporation
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(Registrant)
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/
S
/ ERIC K. BRANDT
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Eric K. Brandt
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Executive Vice President and Chief Financial Officer
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(Principal Financial Officer)
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/
S
/ CINDY A. FIORILLO
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Cindy A. Fiorillo
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Senior Vice President, Finance and Corporate Controller
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(Principal Accounting Officer)
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/s/ S
COTT
A. M
C
G
REGOR
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Scott A. McGregor
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President and Chief Executive Officer
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(Principal Executive Officer)
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/s/ E
RIC
K. B
RANDT
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Eric K. Brandt
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Executive Vice President and
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Chief Financial Officer
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(Principal Financial Officer)
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/
S
/ S
COTT
A. M
C
G
REGOR
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Scott A. McGregor
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Chief Executive Officer
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/
S
/ E
RIC
K. B
RANDT
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Eric K. Brandt
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Chief Financial Officer
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