Altera Beats, Weak Guidance

Zacks

Chipmaker Altera Corporation (NasdaqGS:ALTR - News) reported sales of $457.8 million in the fourth quarter of 2011, down 12% sequentially and 18% year over year.

The reported revenues surpassed management’s revised guidance of $438.9 million – $454.6 million and Zacks Consensus Estimate of $451 million.

New products were down 13% sequentially. The decline in revenues in the fourth quarter was due to inventory reduction in the broad end market along with a slowdown in markets such as wireless and test. Nevertheless, military grew significantly in the quarter but Computer Storage declined due to the end of the earthquake-related ASIC replacement business.  Stratix V revenue increased 49% sequentially.

Moving onto margins, gross margin came in at 70.1% compared to 68.0% in the previous quarter and 71.0% in the year-ago quarter. Operating margin came in at 35.0%, down from 39.3% in the previous quarter and 47.4% in the year-ago quarter.

Altera reported a net income of $146.6 million or 45 cents per share compared to a net income of $185.4 million or 57 cents per share in the third quarter of 2011 and a net income of $231.6 million or 72 cents per share in the year-ago quarter. The reported figure missed the Zacks Consensus Estimate of 41 cents.

For 2011, revenues grew 6% year over year to $2.06 billion. Net income came in at $770.7 million or $2.35 per diluted share compared to a net income of $782.8 million or $2.49 per diluted share in 2010.

Meanwhile, the company's board will pay a quarterly dividend to 8 cents per share, which will be paid on March 1, 2011 to stockholders of record as of February 10, 2011.

Going forward, Altera expects sales to be down 5% – 9% sequentially. This implies a revenue guidance of $416.5 million – $434.9 million. Management stated that the program timing in Military section will account for half of the decline. The company expects revenues from wireless segment to be down across multiple geographies due to continued inventory depletion aftermarket softening in the second half of 2011.

Management stated that as the company entered 2012, inventory levels and lead times were normal. Book to bill ratio for the first quarter was above 1 and Altera expects to return to growth in the second quarter of 2012.

Last week, Xilinx Inc. (NasdaqGS:XLNX - News) reported better-than-expected results and provided positive guidance. Although the results for Altera beat expectations, the weaker-than-expected guidance for the first quarter led to a 1.65% decline in after-hours trading as the stock closed at $39.46. In regular trading, shares were up 1.11%.

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