Broadcom: in a narrow spot It is enough to get a value investor slobbering. A weak short-term outlook takes a fifth off a company's shares. The projections were not awful - flattish sales in the coming quarter. But Wall Street was accustomed to near double-digit expansion. The beat-up stock now has a 10 per cent free cash yield. There is more to any investment case than buying when sellers have been made myopic by an ageing rally and a restive Federal Reserve. Broadcom, which issued the weak outlook back in July, is a semiconductor maker with a $15bn market value. Its chips go into home broadband gear (cable boxes and the like), infrastructure equipment for phone companies and mobile devices. Each set of customers contributes about a half-billion of operating income annually. Mobile is the problem. Broadcom's historic strength is in chips for WiFi and Bluetooth communications. Not only is competition increasing here, but mobile device makers, seeking savings in dollars and power consumption, are moving to "systems on a chip," single wafers of silicon that combine WiFi and Bluetooth with an applications processor and a cellular radio. Broadcom has made the move to SoCs too - witness its $164m acquisition last week of SoC technology from Renesas - but it is in a squeeze. In high-end phones, it competes with Qualcomm, which has the advantage of owning crucial cellular patents. At the low end it faces MediaTek, a relative newcomer from Taiwan that already has more than $4bn in annual revenues. The pressure was apparent in the 22 per cent drop in mobile profits in Broadcom's last quarter. Both Morgan Stanley and Deutsche Bank have argued that, at $27, the shares practically price in the disappearance of the mobile segment. Maybe so; but it remains hard to imagine the shares rallying until the situation in mobile gets much clearer. Keep salivating, for now.