Xilinx sees sales to Huawei down by half this fiscal year

Xilinx
Xilinx CEO called for a quick resolution of trade concerns with China as company sees loss of half its sales to Huawei. (Xilinx)

Xilinx reported $850 million in revenues for its first fiscal quarter of 2020 ending June 30, up 24% from a year ago, even with some lost sales to Huawei because of that company's blacklisting by the U.S. Commerce Department. Net income was $241 million.

Sales to Huawei for the entire fiscal year are expected to be down by half, the company said, prompting a call by CEO Victor Peng for a quick resolution to trade differences between the U.S. and China.

A bright spot came from sales of Zynq products, which grew 68% year over year and accounted for 23% of all revenues. The Zynq 7000 is a family of SoC products that integrate software programmability of ARM-based Cortex A9 processors with the hardware programmability of a field programmable gate array.

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Also, continued 5G buildouts drove 66% revenue growth in Xilinx’s wired and wireless segment, which totaled 41% of the quarter’s revenues. “Despite our complete suspension of shipments to Huawei in the middle of the quarter, we saw continued strong demand at many of our wired and wireless customers in support of global 5G deployment,” said CEO Victor Peng, according to a transcript from Seeking Alpha.

“We remain well positioned during this initial wave of the 5G cycle, which we continue to believe will be as a factor larger than the 4G cycle,” Peng added.

However, Xilinx’s second fiscal quarter, which started July 1, could be challenging. Xilinx faces a full quarter’s impact from shipping restrictions for Huawei, other trade-related uncertainty and usual business variability, said Lorenzo Flores, chief financial officer,

Flores said revenues for the second quarter will be $800 to $850 million and include an estimate of revenue from resumption of shipments of products to Huawei currently permitted by the U.S. as well as other products that are pending approvals for a shipping license from Commerce. Xilinx isn’t quantifying the amount of sales to Huawei but expects fiscal 2020 sales to Huawei to be  reduced by more than half, Flores said.

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“I want to emphasize that we cannot predict whether additional government actions may further impact our ability to ship to Huawei as the situation remains dynamic,” Peng said. “We hope a resolution of these issues that led to U.S. and China trade actions is reached as quickly as possible so market-driven trade can resume.”

Analysts said investors reacted negatively to the second quarter outlook delivered after markets closed on Wednesday. The company’s stock dropped more than 5% from $132.14 at market close on Wednesday to $125 at the opening on Thursday. However, it climbed to more than $129 a share by midday Thursday.

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