Chipmaker Altera Corporation (ALTR) reported sales of $535.8 million in the first quarter of 2011, down 4% sequentially and down 33% year over year, but short of the Zacks Consensus Estimate of $537 million.
As anticipated by management, revenue from several of the company’s large telecom & wireless customers declined. Wireless was down significantly due to the end of the fourth round of TD-SCDMA deployment in China and weakness in India, partially offset by growth in WCDMA and LTE. Huawei represented 13% of revenues in the quarter. This decline was partially offset by strength in the automotive, industrial and military verticals.
New product sales increased 13% sequentially. Revenue from 40-nanometer devices increased 8% sequentially and represented 18% of revenues in the quarter. Revenue from 65-nanometer devices declined in the quarter.
Gross margin came in at 72.6%, up from 71.0% in the previous quarter and 71.4% in the year-ago quarter driven by favorable vertical mix. Operating margin came in at 45.8%, down from 47.4% in the previous quarter and down from 40.0% in the year-ago quarter.
Altera reported a net income of $224.1 million, $0.68 per diluted share in the first quarter of 2011 compared with a net income of $231.6 million, $0.72 per diluted share in the fourth quarter of 2010 and a net income of $153.2 million or $0.50 per diluted share in the first quarter of 2010. The reported easily beat the Zacks Consensus Estimate of $0.65.
During the quarter, Altera generated $297.0 million of cash from operations and used $6.5 million in capital expenditures. Altera ended the quarter with $3.1 billion in cash and short-term investments.
Going forward, Altera expects sales to be flat to up 5% in the second quarter. This implies a revenue guidance of $535.8 million–$562.6 million. Altera expects to continue to see significant 40-nanometer growth throughout FY11. 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. We believe the company gained market share in 2010 vis-à-vis its rival Xilinx Corporation(XLNX).
Management stated that the earthquake in Japan (accounting for 15% of total revenues) will not impact results for the quarter. Growth in communications will be driven by Wireless. Altera expects the automotive, industrial, military, computer, networking and other verticals to be flat to slightly down sequentially.
Given Altera’s track record of upgrading guidance as the quarter progresses, we expect an increase in the guidance provided with the earnings results. Gross margin is expected to come around 71%–72%.
Shares were up 0.88% in after-hours trading to close at $47.00.
ALTERA CORP (ALTR): Free Stock Analysis Report
XILINX INC (XLNX): Free Stock Analysis Report
Zacks Investment Research
