Broadcom Pricing Spineometer: 1 of 5 Vertebrae


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published September 29, 2023

Broadcom, a computer and telecommunications networking company, had a positive Q3 2023. Revenue rose 4.9% to $8.9 billion and earnings before interest and taxes rose 3.2% to $3.9 billion over the same period last year.

A review of Broadcom’s August 31st earnings call and financial report provided no insight regarding the importance of pricing on performance.

Hock Tan, CEO of Broadcom stated: “What drives gross margin largely for us as a company is, frankly, a product mix, it’s a product mix.” Neither he nor Kirsten Spears, his CFO, spoke once about pricing in the earnings call.

Since, avoiding pricing discussions is not uncommon for executives, the best gauge of Broadcom’s pricing capability will be that of the alignment between expected need and expressed action.

Pricing at Broadcom would be challenging to manage well.  Academic research has well demonstrated that companies working in fast evolving fields, such as Broadcom, benefit from having a robust pricing team.  Given its size, we would expect to see 65 to 330 professionals engaged in pricing at Broadcom. Some would focus on product line pricing, others on commercial negotiations, and still others on product lifecycle pricing. Some would engage more in strategy while others on price management and analytics.

Unfortunately, research into the investment by Broadcom in pricing did not yield results aligned with expectations.  Pricing does not appear to be an important functional team at Broadcom.  Instead, pricing decisions appear to be made by product, marketing, sales, and finance managers and directors themselves.

It is a choice to rely on engineering prowess and technological megatrends to deliver a profitable business.  For now, it is paying off.  Tomorrow is a different question.

Given the importance and capability of pricing at Broadcom as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of September ‘23.

Broadcom Pricing Spineometer: 1 out of 5 Vertebrae.

AVGO (Broadcom Inc.) fell from 892 the day prior to their earnings call to 857 one week later. FY 2022 revenue of $33 billion with a 42.8% operating margin and P/E ratio near 27.

For FY 2022, a 1% improvement in price would yield 2.3% improvement in operating profits holding all else constant at Broadcom.

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About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.