(Bloomberg) – Micron Technology Inc. and Xilinx Inc. gave strong sales forecasts, suggesting that demand is picking up as parts of the global economy emerge from the close of the pandemic. Shares of both chipmakers rose in extended trading.
Micron, the largest maker of memory chips in the United States, said revenue in the current period will be $ 5.75 to $ 6.25 billion, well above Wall Street estimates.
During a conference call, analysts expressed concern about Micron customers who potentially store chips. That could threaten future orders. However, the company said this year is different from 2019 when high customer inventories affected sales.
Micron manufactures memory chips for personal computers and similar components that store data on smartphones. The Covid-19 pandemic has slowed 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 increased and that has increased sales of Micron components for data center servers. The company’s factories have also ignored any pandemic disruption.
“First, we hope that the data center outlook remains healthy. Second, we expect end-unit and consumer smartphone unit sales to continue to improve, ”said Micron CEO Sanjay Mehrotra.
The new video game consoles will also boost demand for Micron’s DRAM and NAND chips, he added, noting that short-term visibility is limited due to the pandemic, trade tensions and macroeconomic uncertainty.
Micron shares rebounded about 6% in extended trading on Monday. It previously closed 1.4% at $ 49.15. That put stocks down around 9% so far this year, compared to a 5% gain on the Philadelphia Semiconductor Index.
The U.S. trade war with China and the Trump administration’s actions against Huawei Technologies Co. continue to increase uncertainty, the Micron CEO said in the conference call with analysts. The United States tightened restrictions on the supply of chips to Huawei last month and that “is affecting our opportunity in the short 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 higher than a previous forecast.
Xilinx’s enhanced performance also reflects the demand for components to handle the growing online activity. The company is benefiting from the investment to build new fifth-generation, or 5G, wireless networks. Xilinx shares rose more than 7% in extended trading.
“While we have seen some Covid-19 related impacts during the June quarter, our overall business has performed well overall,” said Victor Peng, chief executive officer of Xilinx, in a statement.
In May, Micron raised its revenue guidance due to the boom in online data traffic. However, he also warned that overall demand was still weaker than at the beginning of the year and warned that the economy could 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 last year. Revenue was $ 5.43 billion, a profit 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 blocking helping Micron and his peers. Some chipmakers have struggled to get all the machinery they need to equip new production lines. They argue that this has slowed production gains and may limit supply while supporting prices.
(Updates with comments from the conference call in the third paragraph).
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