Welcome to Broadcom Limited Second Quarter Fiscal Year 2016 Financial Results Conference Call. At this time for opening remarks and introductions, I would like to turn the call over to Ashish Saran, Director of Investor Relations. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Joining me today are Hock Tan, President and CEO, and Tom Krause, acting Chief Financial Officer of Broadcom Limited. After the market closed today, Broadcom distributed a press release and financial tables describing our financial performance for the second quarter of fiscal year 2016. If you did not receive a copy, you may obtain the information from the Investors section of Broadcom's website at www.broadcom.com. This conference call is being webcast live, and a recording will be available via telephone playback for one week. It will also be archived in the Investors section of our website at broadcom.com. During the prepared comments section of this call, Hock and Tom will be providing details of our second quarter fiscal year 2016 results, background to our third quarter fiscal year 2016 outlook and some commentary regarding the business environment. We will take questions after the end of our prepared comments. In addition to U.S. GAAP reporting, Broadcom reports certain financial measures on a non-GAAP basis. A 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. 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. At this time, I would like to turn the call over to Hock Tan. Hock?

Thank you, Ashish. Good afternoon everyone. Well, we delivered strong results for second fiscal quarter of 2016, the first quarter of operations as a combined company. Revenue $3.56 billion came in just a shade above the midpoint of our guidance while earnings per share were significantly higher than guidance. As you all are well aware, demand for hard disk drives and premium smartphones was weak this quarter –Q2, however we experience strong product cycles from switching and broadband in a wide segment enabling Company revenue to come in line with expectation. Our large scale and greater diversity enabled consolidated results to be resilient, mitigating fluctuations in our individual end markets. Earnings came in significantly above expectations enabled by delivering gross margin at a high end of guidance and driving faster than expected ongoing realization of acquisition related cost synergy. Let me now turn to a discussion of our second quarter segment results. Let's start with wired, in addition to classic Avago's custom networking ASIC and fiber optic products, the combination of classic Broadcom has added Ethernet switching and routing and routing ASSPs, physical layer, copper and optical products and in addition in this segment it also includes now classic Broadcom's broadband communication solutions for set-top box, cable modem and carrier access. In the second quarter, wired revenue came in at $2.06 billion and this represents a 58% of our total revenue. This is now obviously our largest segment and it performed better than we had expected in the second quarter. We saw strength across various product lines. We experienced robust demand in switching and routing, standard products including very strong traction for our new Tomahawk switching and Jericho routing platform especially from the cloud and service provider customers. In fact as some of you may know, key customer today announced…

Thank you Hock and good afternoon everyone. Before I start with my comments today, will focus primarily on our non-GAAP results and continuing operations unless otherwise specifically noted. A reconciliation of our GAAP and our non-GAAP data is included with the earnings release issued today, and is also available on our website at broadcom.com. First before I get into the second quarter results, I would like to take a few minutes to review progress we're making towards our long term financial model as we work through completing the integration of classic Broadcom. Fundamentally just to review the financial model with the output of the business model that Hock is driving, the most important element of our model is sustainability of the franchise as we invest in over the long term. When we set out to acquire Broadcom, we recognized our collection of well established businesses with leadership position. [Indiscernible] on the back of proprietary and highly defensible technologies we believe that these franchises were critical to enabling rapidly evolving wireline and wireless ecosystems. While we only have one quarter under our belt, we think that this piece is very much intact. Another key element is discipline. We are actively managing the portfolio to stay focused on investing in the core franchises while monetizing businesses to do not have clear long term sustainability. This is an ongoing process to continue to allow us to maximize returns on our R&D investment. Finally we keep things simple and focus on critical business processes given our now larger economies of scale, we can be even more efficient across our global supply chain and sales platforms, as well as our general administrative function. This takes us to the three key elements in our financial model starting with revenue. But we don't expect the broader semiconductor…

[Operator Instructions] Our first question for today comes from the line of John Pitzer from Credit Suisse.

Good afternoon, guys. Hock, Tom, congratulations on the strong results and thank for letting me ask a question. Hock, I guess my first question pertains to the wireless guidance for the July quarter. I'm kind of curious about a couple of things. Do both the North American and the Korean customer grow sequentially in July or is it just mainly the North American customer. And when you look at that North American customer, does the July guidance reflect a four quarters worth of build benefit of their new high-end phone? Or is it only a partial benefit in the July quarter with really a full benefit coming in the next quarter?

All right. Are you getting very sticky and picky, all right, but to answer your question, it's largely from the certain North American customer that's driving the bulk of the growth. Having said that, the Korean customers does show growth as well on its own, but obviously not to the extent the North American customer is doing because it’s a ramp. It’s the beginning, I could use the word, beginning of the ramp, for their next generation phone and tied to that is this July quarters, our two current quarter Q3, will not show them the full impact of an entire quarter of revenue ramp. It's just the beginning and very back loaded.

That's very helpful. Thanks Hock. And then Tom as my follow-up I'm wondering if you could talk a little bit about the OpEx guidance for the fiscal third quarter. You are showing sequential revenue growth in the fiscal third quarter. Your guiding OpEx effectively flat on a dollar basis. I'm just kind of curious just given more of the opportunities you have to realize M&A synergies why only flat and not better than that. What are the offsets?

Yes. Good question John. It’s really the timing of the realization of synergies, obviously we did better than we thought we'll do out of the gate first quarter and you saw that in the results. A lot of [indiscernible] to a certain extent is tied to system integration and lot of the back office activities that's very much on target to be completed early in the first quarter of next year. And so, I suggest we will see a bit of a pause here this quarter and perhaps a bit in the next, but as looking at the first half of next year you'll see the full realization.

Perfect. Thanks guys. Congratulations again.

Thank you. And our next question comes from the line of Blayne Curtis from Barclays.

Hi guys, I will add my congrats as well, just in wireless can you talk about connectivity business. There was some concern of share loss. You talked about content potentially going up. Can you just walk through where you see opportunities for content to go up and just the barriers around your mobile connectivity business?

Okay. You broke up every few seconds, but if I get it right you're basically asking are we seeing content increase in our wireless revenue in terms of participation in all those premium handset. And as I've always said, year-to-year generation, obviously there are fluctuations in the level of content increase, but over a period of time we have experienced, we have seen and we'll continue to see a steady increase in content. And this is not just about FBAR front-end module content as more and more bands and carrier aggregation features comes into high-end phones. Now that we have Wi-Fi, Bluetooth, wireless connectivity, we are seeing the same phenomenon apply, exactly. I mean the parallel between those two product lines is pretty amazing from our perspective, and it is not coincidental. It's part of the reason it attracts us to our acquisition of Boardcom is the fact that wireless - we see wireless connectivity as a very strategic product line in handsets, particularly in high-end handsets, for instance, fully 80% of data [moves] [ph] to Wi-Fi today in most handsets, not LTE but Wi-Fi, and so the importance of improved Wi-Fi connectivity performance, particularly in form of capacity bandwidth becomes more and more demanding. Improvement becomes more and more needed. And as each generation occurs, our belief is that increasing bandwidth capacity, that increase in performance will follow for the same reasons that increase in requirements for FBAR filters show the same kind of improvement. So we expect – I've seen in FBAR filters that over the last few years content has grown by about 20% fairly steadily and I might almost apply the same principles to wireless connectivity for Wi-Fi and Bluetooth.

Thanks for that. And I apologize for the connection, I’m in Taiwan, but could you also talk about the strength you're seeing in switching and where are you in the ramp of Tomahawk and do you expect to see growth in the switching segment as a whole?

All right. Well, we are seeing very strong booking, very strong demand for our switching and routing product line and along with that we carry related product, related products like you know, PHY, Retimer, all the stuff that are needed to connect various parts, elements of a data centre. So it’s a one big set of content, one might say that, and particularly obviously the switching and routing. Tomahawk as you know launched much earlier than the new Jericho. So Tomahawk is still on a ramp, it’s still on a pretty decent ramp I should say. And we are seeing very strong demand for it this quarter particularly on application, obviously it is used for top of the rack switching for data centers among the cloud and service provider guys. While we're also seeing very interestingly enough that was recently launched by some of our OEM customers, some more advanced OEM customers, is the use of our Jericho product line, [indiscernible] routers, or other way to describe it is a deeply buffered switch and that is increasingly been launched to use as the [spine] [ph] of the data center architecture. And why I put emphasize to the [spine] [ph] is today we just start to see the launch of their same product line deeply buffered on the leaf of that same data centre. So, and that's on an -- both on an accelerated revenue ramp as we're experiencing today. So, big part of this could be a product upgrade cycle we think -- we also believe, there's also very strong underlying build up demand in cloud computing data centers, be they in North America or among the hyper data centre guys or in China.

Great. Thank you.

Thank you. And our next question comes from the line of Craig Hettenbach from Morgan Stanley.

Yes. Thank you. Just following up on wired and the comments of resolving some supply constraints, does that implication as you go out into kind of Q4 in terms of the ability to work through those and what type of visibility do you have there?

Yes. Visibility is increasing by leaps and bounds everyday actually. Yes. There is supply constraint in certain areas and that does extend our lease time somewhat which we are working very hard to improve simply because we believe the demand is real out there. And yes, it does extend to Q4 and we are starting to have visibility on bookings and backlogs in Q4 as we sit here right now.

Got it. And then just as a follow-up in wireless, can you provide any update on the transition from 6 inch to 8 inch in FBAR in terms of how that's going? And then as part of that as you guys have been PHY constraint, there is the wild card kind of China in terms of you get enough supply coming online, the ability to service those customers. Now how does that outlook looks like into fiscal 2017?

I'll move from 6 inch to 8 inch in wafer fab for FBAR in Fort Collins is progressing very much on schedule. Our capacity having very much on track to what we've indicated to you guys right now. And we believe we have build constraint in been able to supply all our customers as we approach the seasonal peak this second half of this year.

Got it. Thank you.

Thank you. And our next question comes from the line of Vivek Arya from Bank of America.

Thanks for taking my question. Hock on wireless, you mentioned content growth have been around 20% or so a year for the last few years on your FBAR RF filters. As you look out the next few years what kind content growth opportunity do you see for the combined FBAR and connectivity portfolio that you have now?

Very good question and looking at what is always a very scary proposition obviously, because I'm guessing and technology changes. I don't call disruption, I call evolutionary even if very evolutionary DCs and we have a very clear roadmap all three years. And I won't even say we'll go beyond three years. It's still hard to predict, but my estimate and guess will be, we will continue to keep doing the same level on a combined basis for the next two three years.

And as the follow-up Hock, as the biggest setback and I think about where you guys are in when I look at other larger cap semiconductor companies most of your larger cap peers are dedicating 100% of the free cash flow to dividends and buybacks, and your preference has been to conduct -- to prefer more M&A so far. So again as you look out the next two three years do you see Broadcom continuing to prefer M&A versus dividends and buyback or do you think there will be a mix between the two as you have said?

Well, it’s a very good question and as Tom articulated I think very, very anecdotally at the beginning of his remark. We've given it – we have been very thoughtful about this basic issue, I call in an issue, its in a way its bit of a high class problem because we thing they are still opportunities, significant opportunities out there for us in Broadcom limited to continue to pursue a strategy we've adopted over the last several years of creating shareholder value by acquisition in this space. And we believe that. Hence as Tom articulated we are positioning ourselves. We are creating a capital allocations strategy that will enable – they'll position us very well to do that. But to answer your question in one, yes, we think the opportunities out there. They are very interesting and opportunistically and care properly, carefully we will keep pursuing that strategy.

Thank you.

Thank you. And our next question comes from the line of Ross Seymore from Deutsche Bank.

Hock, I had one for you on the wired business that you mentioned what was going on in couple of the different areas, but you never mentioned what was happening on the traditional Avago ASIC business. So, I guess the first part of it in wire, what was going on in that and how do you see that going forward? And then as we look into the July quarter, the Broadband segment can you talk about the puts and takes within that sub component of your wired business as well?

Sure. Thanks. Oh, no, on those traditional, you call it traditional, I call it a classic Broadcom as networking ASIC and fiber optics business, is still charging along very nicely. And we're still seeing growth both on fiber optics as well as on traditional ASIC. The reason we don't say it's much about it is because what we are seeing in comparison to the standard switching product portfolio that we're seeing out of classic Broadcom is very strong by comparison in this area of standard switching and routing is extremely strong and probably as I indicated driven by data centers in the cloud guide who are speaking standard solutions versus the enterprise side which is more driven driving towards using ASIC based solutions by the OEM.

Great. Thanks. And I guess this is my follow-up switching back over to the wireless side momentarily. The pace of the ramp you said is very solid in the July quarter and sounds like it will continue in October. Is there a timing difference in the start of that ramp between the classic Avago and classic Broadcom side?

No, really isn't. There isn't. You know like moving from one to the other, no, I don't think so. We have not finished. I think it's still -- they are firm factors that are strong now. I know you mentioned your asset question earlier about both the Broadband, set-top boxes example of Carrier Access and the areas we are seeing lot of strength, one I mentioned is standard switching and routing. The other area we're seeing a lot of strength is Broadband Carrier Access which is PON and DSL and associated with it enterprise, wireless access point, all those connected together in basically pushing into infrastructure to some extend as well as campus environment and we think its streams through in that area. Similar to what we're seeing the level of strength in standard switching and routing. So, I see more specific areas, specific segments or niches in the overall wide market, not all are growing at a same rate. Some are going to less as I indicated and in netbooking ASIC, or fiber optics interconnect, but in carrier access and standard switching and routing we think very strong demand.

Thank you.

Thank you. And our next question comes from the line of Harlan Sur from JPMorgan.

Hi. Good afternoon and great job on the quarterly execution, we also heard demand is pretty high but Tomahawk and Jericho and then other product called Kumron. You talk about the supply constraint, I just wanted to confirm, are the supply constraints associated with Tomahawk and Jericho and Kumron are these little bottlenecks and when do you anticipate this situation to get better?

Yes. Well, we are working through it and big part of it is lead time from the wafer fab have extended somewhat. And these products also take a more like standard period of time to go through the manufacturing process front end and back end. And with working to obviously accelerated, compress this cycle time and we believe we should be able to get there within a matter of couple of months, maybe no more than three months, but again it is a process. And a big part of it is demand that came within the lead shorter than the lead times necessary to produce those products.

Great, thanks for the insights there. And then this is just a follow-up from last Ross's question. So the broadband products are obviously a good part of the mix in wire both the tops and access, looks like you had seasonal growth and some product cycles you mentioned prior earnings Q2, so within the growth outlook for wired in Q3, is the broadband business contributing to this growth as well in fiscal Q3?

Well we'll like to put it this way. If you saw the forecast I have provided, the way we are putting our forecast together, we see very it's strong even in Q2, we saw that in terms of revenue the numbers been very strong. We're not saying that Q3 will continue on the same trajectory, we just saying that Q3 will sustain at a high level that we achieved in Q2 for both broadband and wireless. We're not saying will continue on that trajectory of growth that we saw in Q2. One other way we're saying in Q3 broadband wired is not growing much, but sustained at a high level we saw in Q2.

Got it, okay. Thanks for that Hock.

Thank you. And our next question comes from the line of Toshiya Hari from Goldman Sachs.

Hi thanks for taking my question and congrats on a strong quarter. My first question is on cost synergies. Could you maybe quantify what you realized in Q2 for us and what the outlook is for Q3, and related to that have you buy any chance discovered any incremental opportunities to cut costs beyond your initial target of $750 million?

So let me take that, I think when we talked about the deal announced that in my comments since we closed our target has been $750 million of line of sight synergies, so it’s a gross margin line relative to operating margin line. I think by enlarge we're still committed to that target. When you think about quarter-to-quarter sometimes all that difficult to articulate, but let me put it this way, I think by the time we finish the year exit this year will be roughly halfway through our target, which is a bit of ahead of plan, and then we'll realize the rest in the first half of fiscal year. I hope that gives you a little bit of support.

Okay, that's helpful, thank you. Then my follow-up, I think over the past couple of quarters you've talked about potential opportunities to raise pricing in the classic Broadcom business. Have you already taken action in some areas and if not when should we expect you to do so, and what's kind of the likely impact of gross margins as you kind of take those actions over the next couple of quarters or year two? Thank you.

To correct you, we don’t take any rates. I don't think we ever mentioned about raising prices in classic Broadcom AVGO for that matter, we never did that. What we made mistake is that when we sell to the same customer multiple product lines and because of the - I guess the thing under benefit have been able to supply multiple products to the same customer at a same time fall platform sale, we're able to increase revenue known as pre-pricing top of that and so we’ve done and nothing of that.

Okay, I appreciate that, thank you.

Thank you. And our next question comes from the line of Romit Shah from Nomura.

Yes, thanks. I'm just trying to better understand how to think about wireless for the second half of the fiscal year and I believe it's unusual that the July period as it is this year is the big quarter for wireless even in fiscal 2014 where you had big content gains it was October where you saw, that was really the quarter we saw the big sequential growth, and I'm just - first question is I’m just I’m curious why seasonality in wireless appears to be different this year? Why is July the big quarter instead of what's normally been October?

Okay. Romit, July has never been the big quarter, July in Q3 has never been the big quarter for us if you look back multiple years. Never has been. The big quarter has always been the October quarter, Q4, and never been July, simply because July is the initial ramp up. Okay, and in the back half of the July quarter precisely in the month of partially July, that we start to see shipment because of lead time taken to manufacturing – manufacturing we shift to the old to the contract manufacturers, all our OEM at that time and so you see a small part of it in the July quarter you see a full quarter of impact virtually in the October quarter and potentially if you look back two years ago you will continue to see in the first quarter of fiscal 2017 that end January 2017 before it rolls over the typical seasonality rollover – rollover where the trough will be the second fiscal quarter that we just finished. So no different we are seeing there now, one May household you perhaps when you say wireless revenue ramping twenty odd percent in Q3 this year perhaps might be the best way to describe is for the various reasons I mention and you guys are very well aware of, Q2 this year for that particular generation of phone with something referring to has seen particular weakness known to everyone, and so you're stopping off from a bottom that cheaper than Q2 last year or the – audited for that method. So when you come up for such a bottom to a new generation of phone, which is still have the ramp up in the same fashion with the same kind of profile to reach a certain level of the possibility of supply. So we suddenly see this big mid-20s ramp up. You're right, prior years Q2 to Q3 may not be that twenty odd percent. You'll take Q3 to Q4 to get that but this year is really not Q3 that different perhaps Q2.

So should we take your comments to mean that October for wireless would accelerate quarter-over-quarter versus July?

Yes, that would be the normal condition, yes.

Okay. All right. That’s helpful.

Not the main focus, if I think that in, but if I say by the person or by which the four components are consumed and phones are produced and then shipped, sure Q4 is usually the big quarter of the any year rather than Q3.

Yes, when you mean peak you're talking quarter-over-quarter change instead of absolute dollars?

Right. Absolute dollars obviously depends on how many phones of that particular generation what their goal. Q – Romit Shah: Okay. And then just one other question. I think I have a sense of what the answer is, but I just wanted to hear your rationale for selling the wireless IoT business, it's an opportunity we hear that’s measured in tens of billions of units and I think some of your competitors have highlighted IoT as being one of the more significant growth drivers over the next few years?

Okay, well. Remember some of the criteria for one term fall it’s a franchise product, we only have products that we consider meets within very discipline and very tight criteria of franchise. The most important is sustainability. We’re building a business for ten years, we’re not building a business for as well for 24 months, and I’d be direct most of the IoT products out there early – initially on in the cycle obviously are very much consumer driven, and we obviously saw things very hard and are very discipline or make thing sure, we preserve, we invest in product lines, we invest and we invest a lot in product line that are very sustainable for many, many years rather than product lines where we have to keep investing as the product line changes every year, every other year. And from our viewpoint because of that and because of the tight discipline we put ourselves under, we believe that this is a product line we prefer to have someone else. We have a different set of perspective investing and nurture then for us to deal with. Doesn't mean that they are wrong, we are right, or we are wrong, they are right, all it is beauty lines in the eyes of the beholder.

Okay, thank you.

Thank you. And we have time for one more question. Our final question for today comes from the line of Amit Daryanani from RBC.

Thanks for squeezing me in guys. I guess two questions for me as well. On the wired segment, could talk about how much incremental backlog of the building or how much revenue did you leave on the table because of the supply constraints that you have in the segment, certainly get a sense of is there a potential to pick this back up in October quarter when things normalize?

This is a very hard question to answer. And the fact that matter is, no we don’t know how to answer that question, I would be honest, because if you rather speculate and many of the designs are very full source design for particular OEM, so obviously there is no switch around. Having said from the bigger microscopic system, doesn't mean that design – that opportunity doesn't disappear to somebody else who are able to find a different set of boxes as opposed to component. So if something we're not able to predict for them at the estimate.

Got it. I guess just a follow-up. In your 10-K, you guys disclose you have signed a multi-year agreement with your largest customer. Can you just talk about what let to that development and what sort of parameters are there that give you comfort around maybe the content numbers or your allocation over the next several years along with pricing?

No it's a combination of several factors. One is our overall business model in this company and it applies across the multiple product lines we sell franchises like call it – we compete basically on technology. We have technology. I mean we're walking example of lots and lots of technology in various areas on all areas but in various areas that we feel we are very strong in. Technology includes engineers and IP. And we pride ourselves in therefore using that technology to create develop product which are very differentiated for leading customers in the market we participate. We really do and those customers we take very seriously. We are very loyal. We go 100% in for the customer, and we invest to develop those products. In return we ask for certainty, we ask for partners and we tend to like to enter into long term strategic partnership with a customer where they will continue to use us for future generations of products which enables us to continue to invest into developing technology and products, which enable them to be successful and that investment is not just technology in the case of the 8-K filing, the 10-K filing sorry, that we talked about, it was also capacity, unique capacity in as far. So it's fit very, very nicely, but this is not an unusual kind of transaction. We do that with many of our major strategic customers, who we like to call partners but they'll more rather presumptuous because they are customer and we are the supplier. But we give them technology, we give them balance and we hope we do enough of that that they will sign up for long term partnership with us, which enable us to continue to invest and sustain that franchise and technology and that’s just a many frustration of one of many customers.

Perfect. Thank you, and congrats on the quarter guys.

Thank you for participating in today's earnings call. We look forward to talking with you again when we report our third quarter fiscal year 2016 financial results.

Thank you. That concludes Broadcom's conference call for today. You may now disconnect.