Altera Corporation ALTR reported lower-than-expected results for third-quarter 2015 wherein both the top line and the bottom line missed the respective Zacks Consensus Estimate and declined year over year.
Altera’s third-quarter reported earnings of 20 cents per share missed the Zacks Consensus Estimate of 30 cents and plunged 47.4% year over year. The year-over-year decline was primarily due to a lower revenue base.
Revenues
Altera’s third-quarter revenues not only decreased 20% on a year-over-year basis to $399.6 million but also lagged the Zacks Consensus Estimate of $433 million. The decline was mainly due to weak performance by the telecom and wireless business and lower-than-expected revenues across vertical markets.
In terms of product category, New Product revenues (62% of third-quarter total revenue) declined 12% year over year, while Mainstream (16%) and Mature and Other markets (22%) revenues went down 37% and 23%, respectively.
On a year-over-year basis, revenues from FPGA (84% of third quarter total revenue) decreased 21% and revenues from CPLD (9%) decreased 5% year over year. Other product (7%) declined 22%.
By verticals, Telecom & Wireless (35%) decreased 37% from the year-ago quarter. Industrial Automation and Military & Automotive markets revenues (24%) decreased 6% year over year. On the other hand, Networking, Computer & Storage (21%) increased 1% and Other segment revenues (20%) went down 12% from third-quarter 2014.
By geography, revenues from the Americas region decreased 15% on a year-over-year basis, whereas the same from the EMEA, Asia Pacific and Japan decreased 19%, 19% and 33%, respectively.
Operating Results
Altera reported gross margin of 66.6%, down 22 basis points (bps) from the year-ago quarter, primarily due to lower revenue case and unfavorable product mix.
Total operating expenses were down 2.2% from the year-ago quarter to $188.1 million. As a percentage of revenues, operating expenses increased to 47.1% from 38.5% in the year-ago quarter.
This, in turn, negatively impacted Altera’s quarterly operating margin, which came in at 19.5%, down 883 bps year over year from 28.3%. Reported net income was $61.5 million compared with $118 million a year ago.
Balance Sheet & Cash Flow
Altera exited the quarter with cash and short-term investments balance of $2.12 billion, higher than the previous-quarter level of $2.07 billion. Long-term debt was $1.49 billion, flat sequentially. During the first nine months of 2015, the company generated cash flow from operating activities of $392.9 million compared with $515.4 million in the comparable year-ago period.
Furthermore, concurrent with its earnings release, Altera announced a cash dividend of 18 cents to be paid on Dec 1, 2015 to shareholders of record as on Nov 10.
Our Take
Altera’s third quarter 2015 results were lower than expected and declined year over year. The decline was mainly due to weak performance by the company’s telecom and wireless business and lower revenues across its vertical markets.
Nonetheless, growth in 3G and 4G/LTE deployments, in particular, will increase the demand for FPGAs, which will be beneficial for Altera. Additionally, the company’s transition to 14-nanometer (nm) FPGAs in association with Intel Corp. INTC is likely to be a competitive differentiator.
Altera is currently manufacturing its chips using 28-nm nodes. We believe that the deployment will strengthen its product portfolio and offer more comprehensive and high-value programmable solutions.
Moreover, the continued share buybacks should support the bottom line, going forward.
However, macroeconomic weakness, competition from Xilinx Inc. XLNX and Lattice Semiconductor Corporation LSCC; consolidation in the telecom market, declining margins and volatility in the semiconductor market are concerns.
Currently, Altera has a Zacks Rank #4 (Sell).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment