Altera Trims Outlook, Shares Fall (ALTR) (XLNX)

Zacks

Chipmaker Altera Corporation (ALTR) recently trimmed its revenue guidance for fourth quarter 2012 and updated its financial guidance for 2013.

Altera now expects revenue to be 8% to 10% lower than the third-quarter levels, compared to the previous guidance of down 6% to 10%.
This translates into revenues of $445.5 million – $465.3 million, down from the previous estimate of $455.4 million – $465.3 million.
The solid growth in new products will be more than offset by lower sales of the company’s existing products.
Meanwhile, for 2013, gross margin is targeted around 69% – 70%. Research and Development is estimated at approximately $104 million, driven by increased variable compensation expense and stock-based compensation. SG&A is likely to come around $315 million on the back of variable compensation for bonus, sales commission and stock-based compensation.
Other Income/Expense is projected at $1 million. Tax rate is expected to be 13%. Capital expense is expected to be $65 million.
Earlier, Altera reported a net income of $157.5 million or 49 cents per share in the third quarter of 2012, easily beating the Zacks Consensus Estimate of 46 cents per share.
Altera reported sales of $495.0 million in the third quarter of 2012, down 5% year over year but up 6% sequentially.
However, earnings estimates plummeted as most analysts covering the stock have lowered their guidance. We expect a further drop in estimates as management trimmed their estimates.
The reduction in guidance has led to a 0.16% fall in stock price in after hours trading. Meanwhile, Altera and its prime rival Xilinx, Inc (XLNX) together hold nearly 87% of the PLD market. However, Xilinx seems to have gained traction and has won back its lost market share over the past few months. This does not bode well for Altera in the coming quarters.
Margins have already peaked and it might not be sustainable in the long run. Hence, owing to the macroeconomic weakness, we had earlier downgraded our recommendation to Underperform from Neutral.
Our Underperform recommendation is supported by a Zacks #4 Rank, which translates into a short-term rating of Sell.

ALTERA CORP (ALTR): Free Stock Analysis Report

XILINX INC (XLNX): Free Stock Analysis Report

To read this article on Zacks.com click here.

Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.

Be the first to comment

Leave a Reply