(Bloomberg) — Micron Technology Inc. and Xilinx Inc. gave strong sales forecasts, suggesting demand is recovering as parts of the global economy emerge from the pandemic lockdown. Shares of both chipmakers jumped in extended trading.
Micron, the largest U.S. memory chipmaker, said revenue in the current period will be $5.75 to $6.25 billion, well ahead of Wall Street estimates.
During a conference call, analysts voiced concerns about Micron customers potentially stockpiling chips. That could threaten future orders. However, the company said this year is different from 2019 when high customer inventories hammered sales.
Micron makes memory chips for personal computers, and similar components that store data in smartphones. The Covid-19 pandemic has curbed demand for these devices, however the crisis has helped the company in other ways. With millions of people forced to work from home, online activity has surged and that has increased sales of Micron components for data center servers. The company’s factories have also shrugged off any pandemic disruptions.
“First, we expect the data center outlook to remain healthy. Second, we expect smartphone and consumer end-unit sales to continue to improve,” Micron Chief Executive Officer Sanjay Mehrotra said.
New video game consoles will also drive demand for Micron’s DRAM and NAND chips, he added, while noting that short-term visibility is limited due to the pandemic, trade tensions and macro-economic uncertainty.
Micron’s stock rallied about 6% in extended trading on Monday. It earlier closed up 1.4% at $49.15. That left the shares down about 9% so far this year, compared with a 5% gain by the Philadelphia Semiconductor Index.
The U.S. trade war with China and the Trump administration’s actions against Huawei Technologies Co. continue to add to uncertainty, Micron’s CEO said on the conference call with analysts. The U.S. tightened restrictions on supplying chips to Huawei last month and that is “impacting our opportunity in the near term,” Mehrotra said.
Xilinx, which makes programmable chips for wireless networks, reported preliminary revenue of $720 million to $734 million for the fiscal first quarter. That was up from a previous forecast.
Xilinx’s improved performance also reflects demand for components to handle rising online activity. The company is benefiting from investment to build new fifth generation, or 5G, wireless networks. Xilinx stock climbed more than 7% in extended trading.
“While we have seen some Covid-19 related impacts during the June quarter, our business has generally performed well overall,” Victor Peng, Xilinx’s chief executive officer, said in a statement.
In May, Micron raised its revenue guidance due to the boom in online data traffic. However, it also cautioned that overall demand was still weaker than at the beginning of the year and warned that the economy may deteriorate in the second half of 2020.In Micron’s fiscal-third quarter, net income was $803 million, or 71 cents a share, down from $840 million, or 74 cents a share, in the same period a year earlier. Revenue was $5.43 billion, a gain from a year ago. Wall Street was looking for earnings of 65 cents a share and sales of $5.3 billion.
Some analysts see the virus lockdown helping Micron and its peers. Some chipmakers have struggled to get all the machinery they need to equip new production lines. That has slowed output gains and may limit supply while supporting prices, they argue.
(Updates with comments from conference call in third paragraph.)
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.