Altera Reiterates Guidance
Recently, programmable logic devices maker Altera Inc. (ALTR) reiterated its guidance for the second quarter of 2012.
The company continues to project a sequential revenue growth of 14% – 18% in the second quarter of 2012. The reiterated guidance implies a revenue guidance of $437.5 million – $452.9 million.
Management stated that the company will post strong sequential growth from its 40-nm and 28-nm products. Growth is projected to be broad based across the company’s vertical markets.
Earlier, Altera reported disappointing results for the first quarter of 2012. The company reported sales of $383.8 million in the first quarter of 2012, down 16% sequentially and 28% year over year.
The reported revenues missed management’s revised guidance range of $416.5 million – $425.9 million.
Management stated that the decline in Altera’s first-quarter revenue was more severe than the company's expectation. This was primarily due to a significant decrease in demand late in the quarter by Telecom and Wireless customers. This end market is the largest vertical market for the company. Consequently, orders did not come in as the company expected and the company also faced product mix issues in its industrial business.
The sequential decline in revenues was due to a continued inventory reduction across most markets along with weakness in the communications end market.
Nevertheless, Altera was encouraged by the strong bookings in March as inventory correction by most customers was almost over. The company has also stocked up buffer inventories to ease supply constraints faced in the March quarter.
Altera has a pipeline of 28 nanometer products, which should help it sustain growth levels. We believe the company has an edge over its competitor Xilinx Inc. (XLNX) at the 40nm and 28 nm node. Hence, the company might be able to revive growth earlier than expected.
We expect business to revive in the second half of 2012 and hence maintain our Neutral recommendation. Our recommendation is supported by a Zacks #3 Rank, which translatesinto a short-term rating of Hold.
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