NXP Semiconductor, Extreme Networks raise forecasts, stocks surge

A broad-based semiconductor maker and a computer networking equipment vendor both pointed to brightening trends in their businesses in the three months ended in September.

Shares of chip maker NXP Semiconductors and of networking equipment vendor Extreme Networks both jumped in late trading as the two firms raised their forecasts for the quarter just ended.

NXP, which sells a broad line of semiconductors that go into many kinds of devices, but which has especially strong presence in automobile electronics, raised its outlook for revenue for last quarter to $2.27 billion, above the prior view of $2 billion, offered back on July 28th. Analysts have been modeling $2.01 billion.

CEO Kurt Sievers said that NXP "experienced material improvement in demand across all end markets, but particularly in the Automotive and Mobile end markets."

Added Sievers,

Additionally, demand improved in both our direct and distribution channels. The business environment has improved at a faster than anticipated pace, driving a broad-based increase in revenue, which also enabled higher gross margin. Given the improved outlook, we increased operating expenses in relation to non-executive variable incentive compensation, which taken together, resulted in operating profit margin substantially above guidance.

Extreme, meanwhile, raised its outlook for revenue for the quarter, its fiscal first quarter, to $233 million to $236 million, above a prior forecast offered on August 5th for $220 million to $230 million. Earnings per share is now expected in a range of 5 cents to 8 cents, above its prior view of 1 cent to 4 cents. 

Analysts have been modeling $223.6 million and 2 cents per share. 

NXP plans to release full details on Monday, October 26th, after market close. The company will host a conference call with analysts the following morning, at 8 am, Eastern, which you can catch on the company's investor relations Web site

CEO Ed Meyercord remarked that the "first fiscal quarter outlook improved across a number of financial metrics."

Added Meyercord,

Our better-than-expected performance is a result of strong bookings and customer response to our 'effortless' strategy. The simplicity of our ExtremeCloud IQ platform, edge switching and Wi-Fi applications, and our end-to-end fabric technology is creating differentiation in the market during a challenging business environment. We are especially pleased with our team's execution, as this marks the second quarter of sequential revenue and EPS growth in our business at a higher level of Non-GAAP profitability.

CFO Remi Thomas said the company carried out "continued cost and expense control drove" which lead to "solid operating leverage, and in turn strong cash flow."

Added Thomas,

This allowed us to repay $20 million of our $55 million revolving credit facility during the quarter and reduce our net debt by approximately $24 million sequentially – all while maintaining ample liquidity as cash and cash equivalents remained relatively stable compared to the prior quarter.

NXP shares are up $8.47, over 6%, at $143.30, in late trading.

Extreme shares are up 63 cents, or 15%, at $4.74.

Extreme's management will host a conference call to discuss the results in full on October 28th at 8 am, Eastern time. You can check it out on the Extreme investor Web site