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Broadcom Quarterly Profit Falls, Shares Drop

Chip maker Broadcom posted a 75 percent drop in quarterly profit Tuesday, missing market forecasts as R&D and litigation costs offset higher revenue, sending its shares down 4.5 percent.

The maker of chips for everything from digital music players and television set-top boxes to cell phones said third-quarter net profit fell to $27.8 million, or 5 cents per share, from $110.2 million, or 19 cents a share, a year ago.

The latest earnings per share figure was 2 cents short of analysts' average estimates, even though a 5.2 percent rise in revenue to $950 million had beat Wall Street's forecast of $928.47 million, according to Reuters Estimates.

"Given the revenue upside they should have been able to post an EPS upside," American Technology Research analyst Shaw Wu said. "They look like they're investing more than people thought they would."

Broadcom, which is working to expand its cell phone chips business, unveiled earlier this month a wireless chip design that put it several months ahead of bigger rivals Texas Instruments and Qualcomm.

Broadcom said its research and development costs increased to $94.6 million in the quarter from $78.2 million a year ago.

It said it planned to "continue to invest aggressively in research and development" in the fourth quarter and in 2008 to expand in markets such as wireless. It did not give details.

The company is engaged in multiple legal disputes with bigger rival Qualcomm, which is appealing a U.S. government ban on sales of some phones with Qualcomm chips found to infringe a Broadcom patent.

Broadcom shares fell as low as $40.15 in after-hours trade, after closing down 36 cents at $42.06 on Nasdaq.

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