NXP Forecasts Sales Climbing on Higher Car-Chip Demand

  • Expanding product portfolio helping to drive revenue
  • Net loss expands on charges related to merger with Freescale

NXP Semiconductors NV forecast second-quarter sales that may top analysts’ estimates as the company expects to sell more chips used in cars after buying Freescale Semiconductor Ltd. last year.

The Dutch company, which paid $11.8 billion for Freescale, forecast revenue of $2.3 billion to $2.4 billion in the three months ending June, according to a statement. That compares with the average estimate for $2.34 billion in sales, according to data compiled by Bloomberg.

NXP rose as much as 7.7 percent in New York on Tuesday and was trading 5.9 percent higher at $88.26 at 10:07 a.m., valuing the company at about $30.5 billion.

Sales for chips in the automotive segment are expected to rise by a “mid- to high single digit” percentage in the second quarter, Dan Durn, NXP’s chief financial officer, said in a conference call with reporters.

NXP, which competes against Texas Instruments Inc. in making semiconductors that turn everyday items into connected devices, is the biggest chip supplier to the automotive industry. That has made it less vulnerable to the slowing demand for products used in smartphones and tablets. NXP supplies chips for a range of applications, including advanced driver assistance systems, infotainment and in-vehicle networking between different car systems.

“Auto continues to be a strong story for them,” Anand Srinivasan, an analyst for Bloomberg Intelligence, said by phone, adding that NXP is mostly benefiting from the growing number of chips per car rather than more cars being manufactured.

Eindhoven, Netherlands-based NXP said first-quarter sales rose 52 percent to $2.22 billion, compared with the average estimate of $2.21 billion. The company reported a net loss of $398 million, or $1.16 a share, which it said was driven by merger-related accounting. A year earlier, NXP had a loss of $107 million, or 46 cents.

The company is on track to realize cost synergies from the merger with Freescale, Chief Executive Officer Richard Clemmer, said during the call. Over time, the company is aiming for a gross margin of 51 percent to 55 percent and an operating margin of above 30 percent, Durn said. NXP will provide more details during an investor day in New York on Thursday, he said.

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