TechnologyChip Analysts Say July Sales Data Show the Downturn Isn’t Over
Cisco Poised for 7-Month Low as Analysts Blame China Headwinds
Cisco Systems Inc. sank in pre-market trading on Thursday, after the company gave a first-quarter outlook that was below expectations, pressured by macroeconomic headwinds, including the U.S.-China trade war. The Chinese market was seen as a major factor behind weakness in service-provider orders, and Morgan Stanley wrote that “outsized” macro headwinds “were too much to provide much opportunity for upside.” The firm was one of at least six to trim its price target on the stock. Shares fell 9.1% before the bell to $46, and were poised to open at their lowest level since January.
(Bloomberg) -- Semiconductor companies continue to struggle with weak demand and high inventory levels, analysts wrote, citing the latest month of industry sales data.
Total semiconductor sales fell about 15% on a year-over-year basis in July, according to the brokerages, which cited data from the Semiconductor Industry Association. That followed a drop of 17% in June, and May’s 15% decline.
The report shows that “we remain deep in a semiconductor downturn,” wrote David Wong, an analyst at Nomura Instinet. The report “is in line with the muted forward guidance given over the last six weeks by several chip companies that we consider to be broad indicators for many chip end markets.”
Salesforce Projects Revenue That Tops Analysts’ Estimates
Salesforce.com Inc. gave a revenue forecast that topped Wall Street’s estimates, signaling the maker of cloud-based applications will continue to see rapid growth due to an expanding product lineup and its latest acquisitions. Revenue will be as much as $4.45 billion in the period ending in October, the San Francisco-based company said Thursday in a statement. Analysts projected $4.18 billion, according to data compiled by Bloomberg. Chief Executive Officers Marc Benioff and Keith Block have charted a new path for the market leader in software for managing customer relationships.
Both Citi and Morgan Stanley wrote that the data were below their own forecasts for the month. Citi trimmed its full-year estimate for total semiconductor sales, to $409.9 billion from $410.7 billion.
Morgan Stanley blamed the weak July on a “sharp reversal” in memory-chip sales, which “more than offset strength in logic” chips.
“Broader semis remain weak, given end-demand challenges nearly everywhere,” analyst Joseph Moore wrote to clients.
Longbow Research wrote that it saw “no 2H demand rebound” for semiconductor companies, referring to the second half of the year. Analyst Shawn Harrison added that consensus forecasts for the fourth quarter looked “overly bullish.”
The Philadelphia Semiconductor Index fell as much as 2.2% on Tuesday. In addition to the SIA data, which was released over the holiday weekend, the industry was pressured bybetween the U.S. and China, as more tariffs were levied on both nation’s goods effective Sept. 1. The industry benchmark is down nearly 9% from a recent peak in late July.
Are Chip, Joanna Gaines Thinking of Baby No. 6?
The more, the merrier? Chip Gaines joked about adding baby No. 6 to his and Joanna Gaines’ brood. Relive Chip and Joanna Gaines’ Best Quotes About Family and Parenthood “There’s a running joke with the people that run in our circles where any time things are going well between Joanna and I, at the end of that statement, I’ll sarcastically say — used to be sarcastically — ‘No. 5, No. 5,’” the Capital Gaines author, 44, said at the Chip & Joanna Gaines Spotlight at Inbound 2019 on Friday, September 6. “Well, now we’ve got five children. So now, sarcastically, I would say, ‘No. 6, No. 6,’ when things were going well.
Chipmakers have had a high correlation to the trade issue, as not only do many companies in the industry derive much of their revenue from China, but the country is a key part of their supply chains as well.
Among specific stocks, Texas Instruments Inc., Nvidia Corp. and Advanced Micro Devices fell as much as 2.5% on Tuesday. Broadcom Inc. shed 3.7% intraday.
Following the months of weak sales data, RBC Capital Markets suggested that the industry could be nearing a bottom. “Given the severity of the decreases, we think downside from here is limited,” analyst Mitch Steves wrote, referring specifically to declines in memory chips.
Also on Tuesday, Evercore ISI upgraded a trio of chipmakers; the firm sees “continued positive earnings revisions leading shares higher into year-end and beyond.” Both KLA Corp. and Lam Research Corp. were lifted to outperform from in-line while memory-chip maker Western Digital was upgraded to in-line from underperform.
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China's surplus with the US may exacerbate
tensions by Yawen Chen and Elias Glenn
China saw its trade surplus with the United States reach a record high in June, due to a sharp rise of its exports, data that should fuel the already strong tensions between the two countries.
But signs that exporters accelerated shipments last month, before US tariffs come into effect in the first week of July, suggest that this sharp rise in the surplus is one-off, analysts said. relying on a less favorable trade balance with China in the months to come.
China's trade surplus with the United States, at the heart of the dispute between Washington and Beijing, has been set at a monthly record of $ 28.97 billion (24.92 billion euros), according to Chinese customs data released Friday, against 24.58 billion in May, according to Reuters calculations.
This data was released just a week after the United States began imposing 25% tariffs on $ 34 billion worth of Chinese goods imported. China responded at the same time and on identical amounts.
Donald Trump asks Beijing to reduce its surplus and these figures could aggravate tensions, knowing that Washington has published Tuesday a list of $ 200 billion of additional Chinese products that will be subject to customs duties.
The US president has warned that in the long run, more than $ 500 billion worth of Chinese products, almost all US imports from China, could be taxed.
This trade conflict is disrupting financial markets around the world, raising fears of a large-scale trade war that could weigh on the global economy.
China posted a trade surplus last year with the United States of $ 375.2 billion. This surplus reached 133.76 billion dollars for the first half of 2018.
SLOWDOWN OF EXPORTS EXPECTED IN H2
Overall, the Chinese trade balance shows a surplus of 41.61 billion dollars (36.04 billion euros) for June, at its highest level since December, while analysts expected a surplus of 26.71 billion, after a surplus of 24.92 billion in May.
Chinese exports to the world rose 11.3% last month, a rise well above expectations that was + 10%, according to a Reuters consensus based on 39 analysts, after a rise of 12.6% in May.
"For the future, the pace of export growth will calm in the coming months, with US tariffs starting to take effect and a weakening of global demand," writes economist Julian Evans-Pritchard. Capital Economics, however, emphasizes that the decline in the yen should limit the decline.
Analysts expect a slowdown in growth of Chinese exports in the second half, a development that should weigh on the country's economy, already affected by its efforts to reduce its level of indebtedness.
The Chinese Ministry of Commerce confirmed last month that Chinese exporters had been ahead in their deliveries, in anticipation of new tariffs, which should accentuate the slowdown at the end of the year.
Chinese imports increased by 14.1% in June, down from analysts' expectations of + 20.8% and after a 26% rise in May.
For the period January to June, the country's overall exports increased by 12.8% and imports by 19.9%.
The Ministry of Commerce said this week that it will use the funds released from new taxes imposed on US products to soften the impact of the measures taken by Washington on Chinese companies and their employees.
He also encouraged companies to increase their imports of soybean seeds and cakes, as well as vehicles and seafood products from other countries, and lowered tariffs on animal feed ingredients from several Asian countries.
Separate data, also released on Friday, show that imports of raw materials, from soybean to oil, declined in June compared with the same period last year, while Chinese steel and aluminum smelters last month saw much higher exports than a year ago, helped by rising world market prices in a context of growing fears of slowing global demand.
China is the world's largest producer of steel and aluminum, two sectors subject to tariffs of 25% and 10%, respectively, in the United States since 23 March.
Aluminum exports exceeded half a million tonnes in June, for the second time in China's history, to 510,000 tonnes, or 9.41 billion yuan (1.21 billion euros), up 10.9% in volume compared to June 2017. Exports of iron and steel products rose by 1.9% to 6.94 million tonnes, the highest since July 2017.
(Jean Terzian and Juliette Rouillon for French service, edited by Benoît Van Overstraeten)
China's Huawei reports sales gain despite US sanctions .
BEIJING (AP) — Chinese tech giant Huawei on Wednesday reported a double-digit gain in sales despite U.S. sanctions that threaten to disrupt its smartphone and network equipment businesses. Huawei Technologies Ltd. said its sales rose 24.4% in the first nine months of 2019 to 610.8 billion yuan ($86 billion). That was faster than the 23.2% gain reported for the first half. The announcement followed U.S.-Chinese trade talks in Washington that ended Friday with no word of progress on resolving Huawei's status.The Trump administration, which accuses Huawei of being a security risk, imposed curbs in May on its access to U.S.
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