Xilinx, Inc. (XLNX) recently upgraded its guidance for the September quarter. The company now expects sales to be up approximately 10% sequentially, from the previous guidance of sales being up approximately by 2% – 6%. The increase in guidance was primarily due to the broad-based strength across all end markets and geographies.
Virtex 5 sales are expected to increase significantly in the September quarter and should surpass 20% of total sales. The company expects to ship the majority of last quarter’s delinquencies in the September quarter.
Management reiterated its gross margin guidance of 61%. Operating expenses are estimated to come around $175 million, including $5 million in restructuring charges.
California-based Xilinx designs and manufactures a broad range of high-performance, high-density programmable logic devices (PLDs) for electronic equipment manufacture.
Earlier, rival Altera Corporation (ALTR) raised its revenue guidance for the third quarter driven by improving market conditions. Last month, the world’s largest technology company, Intel Corp. (INTC), raised its third quarter revenue forecast driven by strong demand for programmable chips and microprocessors.
The Semiconductor Industry Association (SIA) recently announced that worldwide sales of semiconductors registered a 5.3% monthly increase and that the year-over-year rate of decline has moderated. The improvement in semiconductor sales reflects rising demand in the consumer sector particularly for products such as netbook, PCs and mobile phones.
The SIA President added that purchases of Information Technology products by the enterprise sector continue to be tempered by caution and longer replacement cycles but there is evidence of a return to seasonal industry patterns.
This signals that the semiconductor sector is all set for a strong recovery in the second half of 2009 after a significant decline in demand and inventory correction in the past twelve months.
It seems Xilinx is all set to benefit from this broad-based growth after ironing out its supply constraints which led to a revenue decline in the previous quarter. We believe the company’s growth will reaccelerate, given the competitive advantages of the company’s 90-nm and 65-nm technologies as well as the end to the inventory correction in the industry.
We maintain our NEUTRAL rating on the stock, which means we expect the company will perform in-line with the broader market.
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