If you are considering becoming a 1M/1M premium member and would like to join our mailing list to receive ongoing information, please sign up here.

Subscribe to our Feed

Weakness In PLD Market

Posted on Wednesday, Jan 5th 2011

Things were looking up for the programmable logic device (PLD) market, led by Xilinx (NASDAQ:XLNX) with annual revenue of $1.83 billion in fiscal 2010 and followed by Altera (NASDAQ:ALTR) with annual revenue of $1.2 billion in 2009. However, Xilinx recently lowered its sales guidance. Altera, on the other hand, acquired optical network IP vendor Avalon Microelectronics. Let’s take a closer look.

Xilinx recently lowered its sales guidance mainly due to weaker than anticipated sales to a few large communications customers in the wireless segment. It now expects third quarter sales to decline 7% to 9% sequentially, from previous sales guidance of flat to down 4% sequentially. The company expects sales growth to return to the communications segment in the fourth quarter based on current backlog and forecasts from its large customers. Gross margin is expected to be approximately 65%, in line with previous guidance.

JP Morgan on Barron’s says that Xilinx appears to be going through a correction that usually lasts for one or two quarters. They add,

“We expect it to hit Altera (ALTR), but not as much. We expect the weakness to impact Altera as it derives roughly 45% of revenue from the communications end-market.
However, we expect less weakness at Altera due to its higher exposure to the China wireless end-market (estimated 18% of third-quarter 2010 sales) as well as higher share at the 40/45 nanometer node (about 60% share for Altera).

We note the China wireless build-out is experiencing higher growth than in U.S./Europe, where Xilinx has higher market share, and where we believe most of the weakness is from.”

Xilinx’s Financials
In its second quarter, revenue was up 49% y-o-y and 4% q-o-q to $619.7 million, and net income was $170.9 million or $0.65 per share versus $64 million or $0.23 per share last year and $158.6 million or $0.58 per share last quarter. Gross margin was 65.6%, up from 61.9% last year and 65% last quarter. Xilinx ended the quarter with $2.1 billion in cash and investments and a net cash position of $800 million.

New product sales increased 17% sequentially, driven by exceptionally strong growth from the Virtex-6 and Spartan-6 field programmable gate array (FPGA) families launched in 2009.

From an end market perspective, communication sales increased 5% sequentially driven by increases in wireless sales. Wireline sales decreased sequentially during the quarter. Industrial and other sales were essentially flat as decreases in defense offset increases in test and measurement. Consumer and automotive sales were up 7% sequentially, driven by increases in consumer and audio/video broadcast and data processing. Sales increased 6% driven by computer and data processing applications.

The stock  is trading around $29.54 with market cap of about $7.65 billion. It hit a 52-week high of $29.56 on January 3.
Chart forXilinx Inc. (XLNX)

Altera’s Financials
Altera recently reiterated its revenue guidance for fourth quarter. Fourth quarter revenue is likely to grow 3% to 6% sequentially, unchanged from previously issued guidance. The company’s new products have been the company’s growth drivers with both Stratix(R) IV and Arria(R) II 40-nm FPGAs posting particularly strong quarterly comparisons.

Altera’s third quarter revenue was $527.5 million, up 84% y-o-y and 12% q-o-q. Net income was $217.5 million or $0.69 per share, compared with $56.7 million or $0.19 per share last year and $180.6 million or $0.58 per share last quarter. Gross margin was 7 0.1%, 1.6 points lower than in the second quarter. Altera ended the quarter with $2.4 billion in cash and increased its quarterly cash dividend to $0.06 per share, up from the previous dividend of $0.05 per share.
New product sales increased 24 percent sequentially and 211% y-o-y. By market, telecom and wireless increased 23% sequentially. Industrial, military, and automotive grew 5% and computer storage networking increased 13%.

Avalon Acquisition
With its Avalon acquisition, Altera expands its portfolio of customizable IP solutions for optical transport network (OTN) applications supporting data rates at 1.2G, 2.5G and 10G, as well as 40G and 100G. Avalon has been a key partner to Altera for many years and is the sole IP supplier for the 100G OTN solutions implemented in its FPGAs.  The stock is trading around $36.15 with market cap of about $11.3 billion. It hit a 52-week high of $38.08 on December 8.

Chart forAltera Corp. (ALTR)

Over the past decade, a range of mobile devices, from smartphones to tablets and netbooks, have driven up the number of connected users and the amount of data and video traffic. The need for lower cost and flexibility are making FPGAs a preferred alternative to ASICs and ASSPs. The PLD market is likely to gather momentum, and the weakness is likely to pass.

Hacker News
() Comments

Featured Videos