Chipmaker Altera Corporation (ALTR) reported sales of $522.5 million, down 5% sequentially and down 1% year over year.
The reported revenues were below management’s guidance of $531.9 million – $553.9 million.
New products grew 43% sequentially. 40-nanometer revenue increased 33% Altera witnessed a 31% sequential increase in Networking, Computer & Storage vertical but declined in other verticals. Altera stated that customers remain cautious and the company experienced weakness at several of its large customers.
Moving onto margins, gross margin declined to 68.0% from 70.9% in the previous quarter and 70.1% in the year-ago quarter. This was primarily due to product mix. In addition, growth in Networking, Computer & Storage vertical was associated with the one-time ASIC replacement business, which carried with it some lower-than-average margin.
Altera reported a net income of $185.4 million or $0.57 per diluted share compared to a net income of $214.6 million or $0.65 per diluted share in the previous quarter and a net income of $217.5 million or $0.69 per diluted share in the year-ago quarter. The reported figure missed the Zacks Consensus Estimate of $0.59.
Meanwhile, the Board increased the quarterly dividend to $0.08 per share, which will be paid on December 1, 2011 to stockholders of record on November 10, 2011.
During the quarter, Altera generated $283 million of cash from operations and used $12.8 million in capital expenditures. Altera repurchased 4.8 million shares for $197 million. Altera ended the quarter with $3.2 billion in cash and short-term investments, flat with the previous quarter.
Going forward, Altera expects sales to be down 7% – 11% sequentially. This implies a revenue guidance of $465.0 million – $485.9 million. Management expects a decrease in communications driven by wireless and increase in automotive, industrial, military and automotive. The company expects a significant decline in computer networking with the end of the temporary ASIC replacement business.
Altera stated that a majority of this decline was due to customers sharply reducing inventory,.
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 from its rival Xilinx Corporation (XLNX).
Gross margin is projected around 70.0%, +/- 0.5% due to vertical mix primarily military business.
The weaker-than-expected results led to a 0.06% decline in after-hours trading as the stock closed at $33.01. In regular trading, shares were down 1.17%.
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