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Analyst Blog

Xilinx Inc. is expected to fetch net $991.8 million from the $1.0 billion public offering of senior unsecured notes. The company expects to use the proceeds for redemption/conversion of its 3.125% Junior Subordinated Convertible Debentures due 2037. The scheduled date fixed for the proposed redemption/conversion of the debenture is Mar 17, 2014.

The current issue of the $1.0 billion senior notes are divided into two denominations of $500.0 million each with coupon rate of 2.125% and 3.000%, and set to mature on Mar 15 of 2019 and 2021, respectively. Xilinx has appointed J.P. Morgan Securities LLC and J. Wood Capital Advisors LLC as the book-running manager and financial advisor, respectively.

It is worth noting that, Xilinx has $934.4 million of convertible debentures in its balance sheet as of Dec 28, 2013. Thus, the current $1.0 billion issue at a relatively lower coupon rate to redeem/convert the debentures would be beneficial for the company.

Xilinx has a strong balance sheet with cash and cash equivalents of $2.46 billion as of Dec 28, 2013 compared to $2.26 billion in the prior quarter. Moreover, Xilinx generated $216.0 million of cash from operations and incurred $11 million in capital expenditure.

Additionally, we commend the company’s rapid adoption of 28-nm nodes driven by higher wireless deployments and strength in the wired communication segment. Moreover, the China LTE market presents Xilinx with an opportunity to drive its top-line growth, going forward.

However, stiff competition from Altera Corp. and dwindling PC (significant consumer for semiconductor chips) market sales keep us concerned for the near term.

Currently, Xilinx has a Zacks Rank #3 (Hold). Investors can also consider stocks such as Juniper Networks and Lexmark International , both sporting a Zacks Rank #1 (Strong Buy).

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