Back to top

Analyst Blog

On Apr 11, 2014, we issued an updated research report on Altera Corp. (ALTR - Analyst Report). We remain encouraged by the company’s field-programmable gate array (FPGA) offerings. FPGAs are widely used in third generation (3G) and fourth generation long-term evolution (4G LTE) network connections. Higher content of FPGA per base station allows higher data bandwidth.

Notably, China’s ramp up of LTE deployments should translate into revenue growth for the company (LTE base stations generally use more FPGAs). Altera already has a strong presence in China by virtue of its partnership with Huawei.

Moreover, the association with Intel (INTC - Analyst Report) to manufacture advanced multi-die devices will positively impact the company. Intel will be making chips for Altera using its 14-nm Tri-Gate Transistor technology. Altera is currently manufacturing its chips using the 45-nm, 40-nm and 28-nm nodes. Intel’s technology will help it to make a smooth transition to 14-nm FPGA production.

However, Altera’s 28-nm business has not done as well as expected, while its closest competitor Xilinx (XLNX) grew at a brisk pace. Therefore, it appears that the company is losing market share. The trend could continue in the coming quarters as Xilinx expects a positive growth while Altera expects its revenues from 28-nm to decline.

Additionally, Altera operates in the semiconductor industry, which is highly cyclical and volatile. Over time, the semiconductor industry has experienced economic downturns and business contractions, which have a severe and prolonged adverse impact on businesses.

Last but not the least, another inherent challenge in the logic business is related to the longer sales cycle. After the selection of the IC, customers may take two or more years to design a system, build prototypes, market sample products for customer adoption and make necessary modifications in the system.

After the final system design is approved, the customer places purchase orders with logic device manufacturers such as Altera and volume production begins. The longer sales cycle stretches out the time for revenue recognition.

Currently, Altera has a Zacks Rank #3 (Hold). In the meantime, however, investors may look at Hewlett-Packard (HPQ - Analyst Report) which sports a Zacks Rank #2 (Buy).

Read the Full Research Report on ALTR
Read the Full Research Report on INTC
Read the Full Research Report on HPQ


Zacks Investment Research

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
CANADIAN SO… CSIQ 38.34 +8.18%
BANCO DO BR… BDORY 16.78 +8.05%
CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%