Altera Inks License Agreement

Recently, Altera Corporation ( ALTR - Analyst Report ) has entered into a multi-year license agreement with IC Manage, Inc. for augmenting its design management services. According to the agreement, Altera will adopt IC Manage’s Global Design Platform (GDP) along with IP Central solutions for improving the efficiency of the company’s development sites across the world.The terms and conditions of the agreement have not yet been disclosed.

The company has selected IC Manage’s design management platform to minimize its design timing through effectively controlling its design data, ameliorating IP reuse, tracing bug interdependencies more efficiently and increasing the multi-site association. Management expressed its ebullience on the association by stating that IC Manage’s GDP and IP Central solutions will boost the company’s design management services and increase its productivity through its customized features.

Altera Corporation recently reported revenues of $465 million in the second quarter of 2012, which dropped around 15% annually but surged 21% sequentially. Reported revenues were better than management’s guidance of $437.5 million to $452.9 million. Altera returned to sequential quarterly growth after three quarters of slowdown in customer inventory. Operating margin in the quarter was 34.3%; increasing from 30.4% in the previous quarter but declining substantially from 43.7% in the year-ago quarter. During the quarter, the company also repurchased 3.5 million shares worth $121.0 million.

Also recently, the company's Board of Directors authorized an increase in its quarterly dividend to 10 cents per share from 8 cents per share, which will be paid on September 4, 2012 to stockholders of record as of August 10, 2012.

The company projects a sequential revenue growth of 14%-18% in the third quarter of 2012. The reiterated guidance implies a revenue guidance of $437.5 million to $452.9 million. Management stated that the company’s 40-nm and 28-nm products will deliver a strong sequential growth in the upcoming quarters. Growth is also projected to be broad based across the company’s vertical markets.

The company pertains to an industry where ominous competition is prevalent. It should stay cautious of big players such as Lattice Semiconductor Corporation ( LSCC - Snapshot Report ) and Xilinx Inc. ( XLNX - Analyst Report ) as it traverses through 2012.

The current Zacks Consensus Estimates for Altera are 46 cents per share and $1.79 per share for the third quarter of 2012 and for 2012, respectively. We currently have a long-term recommendation of ‘Neutral’ on Altera. The stock also bears a Zacks #3 Rank, which translates into a short-term rating of ‘Hold’.