Broadcom has told investors that its second quarter looks good, for reasons that may well be bad news in the longer term.
The chips-and-software-slinger has popped out an 8-K filing in the US that starts with the good news that “the demand environment for our semiconductor products has been consistent with our current expectations during our second fiscal quarter to date.”
And then comes the scarier part: “We believe that this is due, in part, to short-term demand to facilitate an increase in manufacture of end products and infrastructure needed to support a dramatic increase around the world in remote or tele-work, as well as the result of some customers stocking up on parts in anticipation of potential future supply chain disruption due to COVID-19.”
In other words, hoarders are going after chips the same way other cretins went for toilet paper or pasta. And they're probably doing so because they assume things are going to get worse.
Broadcom's filing, submitted to America's financial watchdog, continues with the usual analysis of the coronavirus being unknowably bad for business, “particularly consumer products such as smartphones, which may, in turn negatively impact our results of operations.” It also details how its extensive operations and supplier networks across Malaysia, Taiwan, and the US could expose Broadcom to particular supply chain and execution risks if further restrictions on movement are required. On the upside, Broadcom says its software businesses are holding firm.
HPE has popped out an 8-k of its own in which it withdrew its previous financial guidance.
“We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance and results of operations,” the filing stated. But HPE is pretty certain the impact won’t be positive, writing: “We anticipate that it will adversely affect our business, including by negatively impacting the demand for our products and services, restricting our operations and sales, marketing and distribution efforts, disrupting the supply chains of hardware products and disrupting our research and development capabilities, engineering, design and manufacturing processes and other important business activities.”
The HPE filing also reveals that the company has suspended purchases under its stock repurchase program, presumably because this is a fine time to have plenty of cash at hand. The IT titan also reassured investors, writing: “HPE has a strong balance sheet and liquidity profile. HPE plans to provide more information during its second quarter earnings call based on the information available at that time.” ®