Monday, April 25, 2011

Altera Corp. (NASDAQ: ALTR): Q1 Earnings Preview 2011

Altera Corp. (NASDAQ: ALTR) is scheduled to release its first-quarter earnings after the closing bell on Tuesday, April 26, 2011. Analysts, on average, expect the company to report earnings of 65 cents per share on revenue of $536.63 million. In the year ago quarter, the company reported earnings of 50 cents per share on revenue of $402.30 million.

Altera Corporation designs, manufactures, and markets programmable logic devices (PLD), HardCopy application-specific integrated circuit (ASIC) devices, pre-defined design building blocks, and associated development tools.

In the preceding fourth quarter, the San Jose, California-based  company's net income was $231.61 million or $0.72 per share from $102.97 million or $0.34 per share in the previous year. Net sales increased to $555.38 million from $365.00 million a year ago. .  Analysts, on average, expected the company to report earnings of 71 cents per share on revenue of $527.45 million.

Late in March, the company reaffirmed that it continues to expect sales for the first quarter to decline one to five percent sequentially. The decline in sales implies a sales guidance of $527.8 million – $549.9 million. Altera continues to believe that the Industrial Automation, Military & Automotive vertical market will be up sequentially in the first quarter, while sales in the company's other vertical markets will be flat to down. Revenues from Telecom & Wireless are expected to decline as few customers have rebalanced their inventories as the fourth round of TD-SCDMA deployment was completed in the fourth quarter. This should be partially offset by growth in WCDMA and LTE. Computer and Storage Networking is projected to be flat or down slightly. Gross margin is expected to come around 71% to 72%.

In the long run, Altera expects its largest vertical – telecom and wireless to continue growing but, industrial, military and automotive will grow faster than other end-markets. Altera expects gross margin to gradually decline to 65% by 2012 – 2015. The company targets an operating margin around 36%.

Last month, Altera said that design wins in 40-nanometer are well ahead of any previous generation products. Altera continues to benefit from the growth in 65-nm and 40-nm FPGAs as customer designs move from prototyping to production.In 2010, Altera focused on 28-nm development and will introduce more products in 28-nm than any previous process node in the coming years. Recently, the company announced that it set an industry milestone in semiconductor technology by delivering the most transistors ever packed onto an integrated circuit. Altera's 28-nm Stratix(R) V FPGAs are the semiconductor industry's first devices to feature 3.9 billion transistors. Samples of the first member of Altera's Stratix V FPGA family (Stratix V 5SGXA7) are shipping now.

The company continues to benefit from big trends in the build-out of next-generation wireless networks.  Rebounds in the auto and industrial markets also are providing a lift. It is also grabbing share from competitors while maintaining its focused strategy to lead in speed, density, low-power consumption, time-to-market and high-value features.

China has been a major source of growth for Altera as its versatile chips become more appealing to customers facing spiraling investment costs to develop specialized processors. The maker of programmable logic devices will likely get a spark from China Mobile's increased infrastructure spending. China's top mobile carrier plans $20.2 bil in capital spending this year and $39 bil from 2012-13. 

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 17.28 and PEG ratio (5 yr expected) of 1.27. In terms of stock performance, Altera shares have gained nearly 52 percent over the past year.

Full Disclosure: None.
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