Chipmaker Altera Corporation (ALTR) recently updated its sales guidance for the third quarter of 2011.
Altera now expects third quarter sales to be down 3% to up 1% on a sequential basis compared to the previous sales guidance of up 2% to 6%.
Management stated that the downgrade in guidance was due to weaker demand in several vertical markets including Telecom and Wireless (particularly outside Asia). In addition, Industrial Automation, Military, and Test were also weak as customers are moderating their purchases in light of macroeconomic uncertainty and other near- term changes to their business environment. On a positive note, Altera expects sales from new products to be up sequentially.
The new guidance implies sales between $531.9 million-$553.9 million, compared to the previous guidance of $559.3 million–$581.3 million.
On the last earnings call, management guided gross margin between 69% – 70% in the third quarter, down from the second quarter due to vertical market mix. Altera expects gross margin to recover in the fourth quarter.
Earlier, Altera reported sales of $548.4 million in the second quarter of 2011, up 17% from a year-ago and up 2% sequentially. Net income came in at $214.6 million or $0.65 per diluted share in the quarter, compared with a net income of $224.1 million or $0.68 in the first quarter of 2011 and net income of $180.6 million or $0.58 in the second quarter of 2010. The reported figure beat the Zacks Consensus Estimate by a penny.
The current Zacks Consensus Estimate is $2.68, almost static in the last thirty days. We expect some downward revisions in the consensus earnings estimate to incorporate the downgrade in guidance provided by the company.
Altera, which competes with Xilinx, Inc. (XLNX) is scheduled to report third quarter results on October 20, 2011. The downgrade in guidance led to a 2.5% decline in the stock price in after-hours trading and closed at $33.99. In regular trading, shares were up 0.32% to close at $34.86.
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