) reported earnings of 37 cents per share in the first quarter of
2014, which beat the Zacks Consensus Estimate of 32 cents.
Earnings remained relatively flat on a year-over-year basis,
primarily due to lower-than-expected operating expenses.
Altera's first-quarter revenues not only increased 12.3% on a
year-over-year basis to $461.1 million, but also came ahead of
the Zacks Consensus Estimate of $439.0 million.
The year-over-year increase was mainly attributable to growth in
new product revenues (49.0% of total revenue), which increased
39.0% year over year and offset the 12.0% decline in mainstream
By verticals, all except the Networking, Computer & Storage
(15.0% of total revenue) increased on a year-over-year basis. The
Networking, Computer & Storage segment witnessed a decline of
7.0%, primarily due to weaker-than-expected demand for computers
and tepid demand from vendors of flash-based storage systems.
Telecom & Wireless (45.0% of total revenue) increased 23.0%
from the year-ago quarter, primarily due to LTE deployment in
China. Industrial Automation and Military & Automotive
markets, which comprised of 22% of first quarter revenues,
increased 13.0% from the year-ago quarter. Other segments (18% of
total revenue) increased in single-digit from the year-ago
By geography, Asia Pacific grew 24.0% on a year-over-year basis,
whereas revenues from Japan and EMEA increased 18.0% and 11.0%,
respectively. However, revenues from Americas declined 13.0%.
Altera reported gross margin of 67.1%, which was down 223 basis
points (bps) from the year-ago quarter primarily due to an
unfavorable product mix.
Operating margin came in at 29.2%, up from 28.7% in the year-ago
quarter. Total operating expenses increased 4.9% year over year,
reflecting an 11.3% rise in research and development expenses. As
a percentage of revenues, operating expenses contracted 270 bps
to 37.9% from the year-ago quarter, which favorably impacted
Reported net income was $116.5 million or 37 cents per share
compared with $120.2 million or 37 cents per share in the first
quarter of 2013. Including gain on securities and gain from the
reclassification, net income was $129.0 million compared with
$120.1 in the year-ago quarter.
Balance Sheet & Cash Flow
Altera exited the quarter with cash and short-term investments
balance of $2.91 billion compared with $3.01 billion in the
previous quarter. The company generated cash flow from operating
activities of $130.4 million.
ALTERA CORP (ALTR): Free Stock Analysis
INTEL CORP (INTC): Free Stock Analysis Report
LATTICE SEMICON (LSCC): Free Stock Analysis
XILINX INC (XLNX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Altera expects sales to increase in the range of 2% to 6%
sequentially ($470.3 million to $488.8 million) in the second
quarter. The Zacks Consensus Estimate is pegged at $463.0
million. Management expects revenues from Telecom & Wireless
to be up with wireless revenues increasing sharply, primarily due
to China LTE shipments. Industrial Automation, Military &
Automotive revenues are expected to be down, sequentially.
However, Networking, Computer & Storage revenues are expected
to increase quarter over quarter.
Management projects gross margin of roughly 67.0% in the second
quarter. Research and development expenses are expected in the
range of $104.0 million to $106.0 million, while selling, general
and administrative expenses will likely range between $78.0
million and $80.0 million. Tax rate is expected in a range of
12.0% to 13.0%.
Altera has delivered better-than-expected first-quarter 2014
results with both earnings and revenues beating the Zacks
Consensus Estimate. Although revenues increased year over year,
earnings remained relatively flat. The company provided a modest
guidance for the upcoming quarter.
Nonetheless, growth in 4G/LTE deployments in particular will
increase demand for FPGAs, which will be beneficial for Altera.
Additionally, Altera's transition to 14nm FPGAs in association
) is likely to be a competitive differentiator.
Altera is currently manufacturing its chips using 28-nanometer
nodes. We believe that the deployment will help Altera to
strengthen its product portfolio and offer more comprehensive and
high-value programmable solutions.
However, macroeconomic weakness, competition from
Lattice Semiconductor Corporation
), consolidation in the telecom market, declining margins and
volatility in the semiconductor market are concerns
Currently, Altera holds a Zacks Rank #3 (Hold).