The Going Gets Tough for PLDs This Xmas - Analyst Blog
December 09 2011 - 12:08PM
Zacks
Programmable Logic Devices (PLD) maker Altera
Corporation (ALTR) recently slashed its revenue guidance
for the fourth quarter of 2011.
Altera now expects revenues in the fourth quarter to decline by
13% to 16% on a sequential basis, compared to the previous guidance
of 7% – 11%. The new guidance implies revenues in the range of
$438.9 million – $454.6 million, significantly lower than the
previous guidance of $465.0 million – $485.9 million.
Reasons for Downgrade
Altera stated that the revenue outlook has deteriorated across
all major vertical markets, including both large and small
customers. Only North America is expected to benefit from rising
military sales. All other geographies are expected to be weak. Most
customers reduced demand due to economic uncertainty, macroeconomic
concerns, and lower than planned sales.
This is the second instance where Altera lowered its revenue
guidance in the past few quarters against its usual practice of
upgrading guidance as the quarter progresses.
Like its prime rival Xilinx Inc. (XLNX), Altera
is also clearly having a tough time due to the slowdown in the
economy. In the September quarter, Altera also lowered its revenue
guidance due to weaker demand in several vertical markets including
Telecom and Wireless (particularly outside Asia). In addition,
Industrial Automation, Military, and Test were also weak as
customers moderated their purchases in light of macroeconomic
uncertainty and other near-term changes to their business
environment.
Xilinx also followed suit in the September quarter. For the
December quarter, Xilinx has already estimated a 3% to 8%
sequential decline. We now expect a more severe decline for Xilinx
as well given the tough economic conditions being faced by most
semiconductor companies.
Other Key Players
Concurrent with Altera, industry leader Texas
Instrument (TXN) slashed its revenue guidance for the
December quarter as demand was adversely impacted with most
customers bringing down their high-level of inventories. Texas
stated that the reductions are due to broadly lower demand across a
wide range of product markets, customers, end products, the only
exception being wireless applications processors. In particular,
recessionary environment in Europe continues to impact the business
followed by Asia and the US.
Industry Trends
Last month, chipmaker Microchip Technology Inc
(MCHP) also cited demand being weak across end markets leading to a
build-up in inventories across the supply chain. In fact, the
company was one of the first semiconductor companies to lower
expectations in the earnings cycle. The company believes the
December quarter is likely to mark the bottom for both sales and
earnings and growth will resume in the first quarter of 2012.
Although most companies expect economic conditions to improve by
the March quarter-end, the scenario doesn’t appear bright to us at
this point. The world economy seems to be in turmoil and recovery
is expected to be gradual. With Europe in doldrums and Asia also
getting impacted, order patterns will continue to be weak and
bleak. We continue to be wary and stay clear of investing in this
sector now.
Meanwhile, the downgrade in guidance led to a 6.12% decline in
Altera’s stock price in after market-hours trading to close at
$33.31. Shares of Texas Instrument witnessed a 6% decline.
ALTERA CORP (ALTR): Free Stock Analysis Report
TEXAS INSTRS (TXN): Free Stock Analysis Report
XILINX INC (XLNX): Free Stock Analysis Report
Zacks Investment Research
Texas Instruments (NASDAQ:TXN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Texas Instruments (NASDAQ:TXN)
Historical Stock Chart
From Jul 2023 to Jul 2024