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Tickers in this Article: ALTR, INTC, ASML, LLTC
Although Altera Corp. (Nasdaq:ALTR) lowered guidance for the next quarter, earning the wrath of investors, it did so more as a precaution than because of any weakness in spending by its customer base.

Altera manufactures programmable logic devices and application-specific integrated circuits. A programmable logic device can be programmed by customers (other technology companies) to perform whatever function is desired within their products, while an application-specific integrated circuit is a logic device that serves a single function for one application. The products are sold to the communications, computer, industrial and consumer markets.

Tempering Guidance
Altera reported revenues and earnings that came in slightly ahead of street estimates with $356.8 million in revenues and 31 cents earnings per share (EPS), versus expectations of $354.8 million in revenue and 30 cents EPS from analysts polled by First Call/Thomson Financial. Q4 guidance is expected to be $346 million to $361 million in revenue, compared to analysts' consensus of $361.1 million. The new guidance was due to "unprecedented global macroeconomic uncertainty", according to Timothy Morse, CFO.

During the conference call, management provided details on revenue growth sequentially by vertical market:

Computer – down 17%;
Consumer – down 1%;
Industrial – Up 4%;
Communications – Flat.

Business Tied Closely To Corporate Spending
Management indicated it was not exposed to the consumer market as much as corporate spending.

"With the company business tied more closely to corporate, government and communications carrier CAPEX spending, if the credit markets tighten and cause a change to capital plans, then our business could be impacted," said John Daane, Altera's president and CEO.

The industrial market was strong despite the slowing economy due to growth in business from the military. (Learn more about how companies spend their money at Evaluating A Company's Capital Structure.)

Altera ended the quarter with $1.28 billion in cash, or $4.25 per share, although much of this is offshore and can't be repatriated to the United States without paying taxes.

Spending Slowdown
Industry news indicates an overall slowdown in spending. The Global Semiconductor Alliance's Q2 report on fabless chip revenue showed that growth slowed to 4% sequentially.

Intel (Nasdaq:INTC) also tempered expectations when it released earnings. The company cited difficulty in projecting next quarter and 2009, and said, "Uncertainty in global economic conditions makes it particularly difficult to predict product demand." Intel said it would issue a midquarter update Dec. 4 instead of waiting until it reports its end-of-year results.

ASML (Nasdaq:ASML), a Dutch semiconductor company, also reported that shipments would be down for Q4, citing its customers' difficulty in accessing capital. Linear Technology Corp. (Nasdaq:LLTC) beat estimates for fiscal Q1 but took an ax to guidance for the quarter ending in December, saying that revenue would be down 10-20%.

International Growth
Altera management is banking on international growth to help boost sales in Q4 and next year, citing an expected $25 billion to $30 billion annual expenditure over the next three years in China for network and wireless equipment.

Altera's cut in guidance was precautionary, as the company has seen no real weakness in its business segments. (See more about companies' predictions at Can Earnings Guidance Accurately Predict The Future?)

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