On Jul 5, 2013, we retained our Neutral recommendation on semiconductor chip-maker, Xilinx Inc. (XLNX). On Apr 24, Xilinx posted mixed first quarter 2013 results. Revenues declined on a year-over-year basis and missed the Zacks Consensus Estimate. But the quarter’s adjusted earnings of 47 cents were better than the year-ago level and also ahead of the Zacks Consensus Estimate.
Xilinx delivered a positive earnings surprise in the last quarter, with an average beat of 5.95% for the trailing four quarters. Currently, Xilinx has a Zacks Rank #3 (Hold).
Why a Neutral Stance?
Xilinx currently dominates the Programmable Logic Device (PLD) market with its 28 nanometer (nm) field programmable gate array (FPGA) products. The company has introduced a broad array of 28nm FPGA chips during fiscal 2013. The new product launches led Xilinx to generate better-than-expected revenues from the FPGA portfolio in the last quarter.
Management expects 28-nm FPGA revenues to grow 150.0% year over year in fiscal 2014 based on continued ASIC and ASSP displacement and higher usage of FPGAs in next generation wireline & wireless networks and data centers. LTE deployments in the communications market will drive FPGA demand leading to continued momentum for Xilinx.
Xilinx’ leadership could get affected while transitioning to lower nodes. Though archrival Altera Corp. remained an underdog in the 28-nm transition, the trend could reverse in the case of 20-nm or 14-nm. Both the companies are planning to launch their 20-nm products shortly.
Notably, Altera has started working on developing 14-nm FPGAs leveraging Intel Corp.’s tri-gate transistor technology. In response, Xilinx also announced its 16-nm plans in association with its foundry partner Taiwan Semiconductor Company.
Estimate Revisions
Over the last 30 days, estimates for 2013 and 2014 remained unchanged. Hence, the Zacks Consensus Estimate for 2013 and 2014 also remains unchanged at $2.00 and $2.30 per share, respectively.
The lack of estimate revisions indicates that there are no drivers to move the stock in either direction.
Other Stocks to Consider
Other stocks in the technology sector that are currently performing well include Hewlett-Packard Co. (HPQ), NetApp Inc. (NTAP) and Micron Technology Inc. (MU). All these companies carry a Zacks Rank #2 (Buy).
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