We have reiterated our Neutral recommendation on Xilinx, Inc. (XLNX).

Xilinx recently increased its quarterly cash dividend to $0.19 per share from $0.16 per share. The dividend will be paid on June 8, 2011 to stockholders of record at the close of business on May 18, 2011.

In addition, Xilinx reiterated its sales guidance for the March quarter of flat to up 5% sequentially. This guidance implies sales of $567.0 – $595.4 million. The guidance assumes that the company’s shipments to customers in Japan will not be affected by the recent earthquake. The company is still in the process of assessing the situation in Japan.

Earnings estimates for Xilinx for fiscal 2011 have more or less been static in the last thirty days with just one analyst out of twenty-five covering the stock lowering his estimate.   

However, sixteen out of twenty-six analysts covering the stock slashed their estimates for fiscal 2011 while only one analyst moved in the opposite direction. Consequently, earnings estimates for 2011 have declined by nine cents in the last thirty days.

Estimates for the March quarter have been static but estimates for the June quarter have declined by two cents. This was primarily because thirteen out of twenty-four analysts covering the stock decreased their estimates.

We believe Xilinx lost market share to prime rival Altera Corporation (ALTR) in 2010. Altera’s lead in the 40 nm technology node can bring about a market share loss for Xilinx in the coming years as well. In addition, Altera seem to have an edge in the 28nm node.

Capital spending by carriers in China is also expected to slow down in 2011, leading to an inventory correction across the semiconductor space, which should impact Xilinx as communications is the largest end-market served by the company.

Our Neutral recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.

 
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