Broadcom Inc.

Welcome to Broadcom's fourth quarter and fiscal year 2019 financial results conference call. At this time, for opening remarks and introductions, I would like to turn the call over to Beatrice Rosado, Director of Investor Relations of Broadcom. Please go ahead, ma'am.

Thank you, Operator, and good afternoon, everyone. Joining me today are Hawk Tan, President and CEO, and Tom Krause, Chief Financial Officer of Broadcom. After the market closed, Broadcom distributed a press release and financial tables describing our financial performance for the fourth quarter and fiscal year 2019. If you did not receive a copy, you may obtain the information from the investor section of Broadcom's website at broadcom.com. This conference call is being webcast live and the recording will be available via telephone playback for one week. It will also be archived in the investor section of our website, ads.com.com. During the prepared comments section of this call, Hawk and Tom will be providing details of our fourth quarter and fiscal year 2019 results, guidance for fiscal year 2020, and commentary regarding the business environment. We'll take questions after the end of our prepared comments. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. The reconciliation between GAAP and non-GAAP measures is included in the tables attached to today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. With that, I'll turn the call over to Hawk.

Thank you, Big. Good afternoon, everyone, and thank you for joining today. Now, we concluded fiscal year 2019 with record revenue of $22.6 billion, growing 8% year over year despite a challenging environment. Our semiconductor solution segment declined 8% year over year, but this was more than offset by our infrastructure software segment benefiting from the integration and healthy results from the CA business. In semiconductors, almost all product lines were down year on year with one clear exception, and that's networking, where the existing growth drivers continue their strong momentum. In infrastructure software, Renewals in our core accounts grew double digits, which more than offset the expected attrition in our non-core accounts. Now, as we embark on fiscal 2020, I want to provide you some insight into our latest strategic assessment of our semiconductor businesses and our current view of the market. I also want to give you an update on our software business including our latest Symantec acquisition. I'm sure you have seen the guidance in our earnings release today that we are headed towards $25 billion in revenue in 2020, and I'll let Tom go through the details on how we get there. But before I turn this over to him, let me now give you the broader picture. So when we look at our semiconductor segment today, we are increasingly thinking about it as a core and fabulous semiconductor business that consists of networking, broadband, and storage connectivity products focused on enterprise, service providers, and cloud infrastructure. Here we get a lot of strategic synergies. and scale across our end markets with our customers and with our core silicon technology. This in turn drives efficiencies in our sales, R&D, and supply chain activities. Our infrastructure software businesses, which focus primarily on large enterprises, are in fact quite complementary enhance these core semi-businesses by bringing us closer to our end customers. This gives us a natural barrier to entry and gives us comfort that we can drive sustainable revenue growth and improve profitability long-term. Alongside these core semi-conducted businesses, we have several valuable semiconductor businesses that are much more standalone in nature due to their unique customers, technology, and supply chain characteristics. Now, these will include our wireless businesses and our industrial businesses. We don't have the same kind of synergies with this as we do in our core semi-business. Increasingly, we view this business as more financial assets, especially in terms of capital allocation, balance sheet optimization, and how we choose to leverage resources and manage the company. Turning to our current assessment for core semi-business, it's extremely positive. We believe we are uniquely positioned with an industry-leading portfolio, extending connectivity across Enterprise, telcos, and cloud. In data center switching and routing, we're enabling the cloud with the transition to 400 gigabit per second. We also just announced 800 gigabit per second, which further demonstrates our leadership in this space by far. In 5G cellular infrastructure, we are leveraging our Ethernet technology to bring the network to the edge in open RAN or regular access networks through a combination of custom and standard products across both analog and digital domains. And as we know, as more laws for computing starts to slow down, as it has, we continue to gain momentum in developing and delivering hardware accelerators to offload computing for the cloud service providers across an increasing variety of workloads. Initially with virtualization, hypervisors, and extending today to AI, security encryption, and video transcoding. And in wireless access in enterprise and home gateways, we are, of course, leading the market transition to Wi-Fi 6. And finally, we actually do have now an organic integrated silicon photonics effort underway, combining our capabilities in switching with our strong legacy in fiber optics for next generation cloud and networking architectures. So in summary, we plan to increase our investment in core semiconductor businesses to position ourselves for expected future growth opportunities where we can leverage our scale of investment, industry-leading focus execution, and breadth of IP. Now, we all know it has been a tough year for semiconductors in general. We found semiconductor segment down approximately 8%, as I indicated. But if we look at our core semi-business as I defined it, It has held up reasonably well. To put some numbers around it, this business did a little over $11 billion in sales in 2019, which was down just less than 4% from 2018. We think this business is stabilizing, and we believe, given the growth drivers I just highlighted over the next several years, that this business can actually grow to 8% annually. Turning to infrastructure software, we started a few years ago with Brocade, a storage area networking switch business. Then we acquired CA, which is the leading independent provider of mainframe tools, and we just closed on Symantec, the leading enterprise security software provider in November. Our brokerage acquisitions was predicated on view that a fiber channel same switching market for large enterprises was sustainable and that we could just grow our leadership position with additional investment. And after a couple of years now, it's fairly clear this investment thesis was right. Similarly, we bought CA because we felt the mainframe market for the largest enterprises was stable and, in fact, growing. And the CA was critical to customers who relied on mainframes to run their business. It's still early innings, one year now, just over one year, but mainframe compute is growing with our target customers. We are increasing investment in mainframes to support our leadership position. The CEA customer transition continues with core accounts growing double digits while non-core accounts a treat as we had planned. We expect Cementac to start with $1.8 billion of core, sustainable, incremental annual run rate revenue that we believe we can grow to over $2 billion over the next three years. Our infrastructure software segment is becoming more predictable with rateable recurring revenue contribution from CA and now also with Cementac. and we anticipate over $7 billion infrastructure software revenue in fiscal 2020. In summary, therefore, our long-term plan for this company is to invest in organic growth in our core semi-business while continuing to scale up our infrastructure software business through disciplined and highly accretive acquisitions. Now, let me turn the call over to Tom.