) reported earnings of 31 cents per share in the fourth quarter
of 2013, which beat the Zacks Consensus Estimate by a penny.
However, on a year-over-year basis, earnings dropped 18.1%
primarily due to higher operating expenses.
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Altera's fourth-quarter revenues not only increased 3.4% on a
year-over-year basis to $454.4 million, but also came ahead of
the Zacks Consensus Estimate of $442.0 million.
The year-over-year increase was mainly attributable to growth in
new product revenues (47.0% of total revenue), which increased
26.0% year over year and offset the 13.0% and 9.0% decline in
mainstream and mature product revenues, respectively.
By verticals, all except the Telecom & Wireless segment
(40.0% of total revenue) increased on a year-over-year basis. The
Telecom & Wireless segment witnessed a decline of 6.0%.
Industrial Automation and Military & Automotive markets
increased 10.0% from the year-ago quarter. Networking and
Computer & Storage segments increased double-digits from the
year-ago period and were relatively consistent with the year-ago
By geography, Japan grew 20.0% on a year-over-year basis, whereas
Asia/Pacific and Americas posted modest increase of 8.0% and
1.0%, respectively. On the other hand revenues from EMEA declined
Altera reported gross margin of 68.3%, which was down 135 basis
points from the year-ago quarter primarily due to unfavorable
Operating margin came in at 25.8%, down from 31.4% in the
year-ago quarter. Total operating expenses grew 14.9% year over
year, reflecting a 14.4% growth in sales and marketing expenses
and a 13.5% increase in research and development expenses.
Reported net income was $98.9 million or 31 cents per share
compared with $120.8 million or 37 cents per share in the fourth
quarter of 2012. Including gain on securities and gain from the
reclassification, net income was $72.1 million compared with
$121.8 in the year-ago quarter.
Balance Sheet & Cash Flow
Altera exited the quarter with cash and short-term investments
balance of $3.01 billion compared with $2.96 billion in the
previous quarter. The company's year-to-date cash flow from
operating activities was $590.2 million.
Altera expects sales to increase in the range of (2%) to 6%
sequentially in the first quarter of 2014. Management expects
revenues from Telecom & Wireless to be up with wireless
revenues increasing sharply, primarily due to China LTE
shipments. This is expected to more than offset the decline in
telecom revenues. Industrial Automation, Military &
Automotive revenues are expected to remain flat, sequentially.
Management projects gross margin of roughly 68.0% in the first
quarter. Research and development expenses are expected in the
range of $100.0 million to $102.0 million, while selling, general
and administrative expenses will likely range between $75.0
million and $77.0 million. Tax rate is expected in a range of
12.0% to 13.0%.
Altera has delivered encouraging fourth-quarter 2013 results with
both earnings and revenues beating the Zacks Consensus Estimate.
Although revenues increased year over year, earnings dropped
sharply. Guidance for the upcoming quarter was also tepid.
Though, Altera's association with chip maker
) will keep it ahead of its peers, synergies from the partnership
are not likely to boost fundamentals in the near term.
Moreover, 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).