Altera Corporation (ALTR) recently reiterated its sales guidance for the first quarter of 2011. Altera continues to estimate a sequential decline of 1% to 5% in the first quarter. The decline in sales implies a sales guidance of $527.8 million – $549.9 million.
Management expects that the Industrial, Automation, Military and Automotive vertical market will be up sequentially driven by an increase in demand from military and automotive markets. Sales in other vertical markets are estimated to be flat to down.
Revenues from Telecom & Wireless are expected to decline as few customers rebalance inventory 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.
The industry-leading 40-nanometer product execution and the company’s ongoing efforts to improve operating efficiency remain the keys to long-term revenue growth. Altera stated 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.
Altera’s lead at the 40 nm technology node can bring about a market loss for rival Xilinx, Inc. (XLNX) in the coming years. The company seems to have gained market share as Xilinx continues to be plagued with supply constraints in its 40 nm products.
In 2010, Altera focused on 28-nm development and it will introduce more products in 28-nm than any previous process node in the coming years. Altera taped out its first Stratix V 28-nm family member in December and plans the sample in the first quarter.
Altera will announce its first quarter results on April 26, 2011.
We maintain a Neutral recommendation on Altera supported by a Zacks #3 Rank which implies a short-term rating of Hold.
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