Ignoring Avago Technologies Ltd (AVGO) Isn’t a Good Idea, Even Though it’s Witnessing Short-term Weakness: Apple Inc. (AAPL), Research In Motion Ltd (BBRY)

The other businesses

The story in Avago’s wired infrastructure business was somewhat similar to that of the wireless business as transition at a major customer weighed on growth. However, the company believes that its enterprise network has hit bottom and a ramp up of 40G data center switching will lead to a sequential improvement in this business.

However, Avago’s industrial business is still seeing weakness, and is not expected to return to growth in the near future. Slow industrial growth in China was offset by declines in Europe and Japan. Upticks in the industrial business will depend on economic recovery, and until and unless this recovery becomes sustainable Avago doesn’t expect this business to run on full power.

Final words

Avago has gained close to 6.5% so far this year, but there seems to be a question mark about whether or not it will be able to keep up its momentum. Its wireless business will have a tepid quarter, while the industrial market is not in the best of health. A recovery in the wired infrastructure business is in the cards, but it won’t be enough to offset the declines in the other two.

Speaking of the long-term, Avago looks like a solid company. It has a diversified business, pays a dividend, has almost no debt, and boasts of bellwether clients such as Apple Inc. (NASDAQ:AAPL), Samsung and Cisco. However, investors might consider waiting for the shares to get cheaper from the 15 times earnings they currently trade at, and should keepin an eye on the recovery of its end markets.

The article Ignoring This Stock Isn’t a Good Idea, Even Though it’s Witnessing Short-term Weakness originally appeared on Fool.com and is written by Harsh Chauhan.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.