Back to top

Analyst Blog

Xilinx Inc. (XLNX - Analyst Report) reported earnings per share of 46 cents in the second quarter of fiscal 2013, easily beating the Zacks Consensus Estimate of 41 cents. However, the quarterly earnings failed to surpass the year-ago earnings as well as the prior quarter earnings of 47 cents a share. Net income declined 5% sequentially and 2% year over year to $123.4 million. 
 
California-based Xilinx Inc. is engaged in designing and manufacturing a broad range of high-performance, high-density programmable logic devices (PLDs), such as field-programmable gate arrays (FPGAs) and complex-programmable logic devices (CPLDs).
 
The company reported total sales of $543.9 million, down 2% year over year and 7% sequentially, but in line with management’s guidance. The overall decline was attributable to weaker-than-anticipated sales from industrial and Aerospace and defense and computer and data processing, offset somewhat by better-than-expected sales from wireless communications. 
 
Geographically, the company’s sales were down sequentially across all regions except Japan. New product sales increased 7% sequentially, driven by higher sales of 28 nanometer families, partially offset by flat 40 nanometer sales. Revenues from 28 nanometer surpassed management’s target of $20 million. 
 
Mainstream products increased 3% during the quarter, driven by strength from the Virtex-5 products, attributable to LTE deployment activity. Base products declined by almost 20% sequentially, due to soft industrial, defense and communications segment performance.
 
Sales from communications in data center increased 3% sequentially, driven by strong wireless sales, which more than offset expected declines in wireline. Broadcast, consumer and automotive sales declined 15% sequentially as sales from all categories were flat to down sequentially.
 
Margins
 
Gross margin decreased to 65.5% from 66.0% in the previous quarter but was up from 63.9% in the year-ago quarter, primarily due to continued focus on yield improvement and cost reduction, which offset significant impact from customer and product mix during the quarter. Operating margin decreased to 27.2% from 28.2% in the previous quarter and 27.9% in the year-ago quarter, despite lower expenses. 
 
During the quarter, Xilinx generated $197.4 million of cash from operations and incurred $7.6 million in capital expenditures. Xilinx paid $58 million in cash dividends. Xilinx ended the quarter with cash, equivalents and short-term investments of $1.7 billion, flat with the previous quarter. Days sales outstanding decreased by 3 days to 35 days. Inventory increased by $11 million sequentially to $204.0 million. 
 
Guidance
 
Xilinx stated that the backlog entering into the December quarter was down sequentially. In addition, management estimates that continued macroeconomic uncertainty may result in unpredictable customer ordering patterns. Sales of base and mainstream products will likely decline. Nevertheless, Xilinx, which competes with Altera Corporation (ALTR - Analyst Report), expects continued growth from new products.  Consequently, Xilinx expects sales to be down 1% to 5% sequentially in the third quarter of fiscal 2013 and sales from all geographies are projected to decrease.  
 
Gross margin is forecasted around 66%, marginally up from the September quarter, primarily due to improving customer mix. Operating expenses in the December quarter are expected to be approximately $224 million, including approximately $3 million of amortization of acquisition-related intangibles. 
 
Meanwhile, owing to the uncertain business environment, Xilinx is taking steps to reduce headcount and lower discretionary spending. The weak macroeconomic environment affected sales for the September quarter and has also resulted in lower-than-seasonal guidance for the December quarter. 
 
The weak guidance drove a 0.56% decrease in the share price in the aftermarket hours trading to close at $33.77. Earlier, the stock, gained 0.65% to close at $33.96 in regular trading.
 
We maintain an Underperform recommendation on Xilinx in the long run. However, we have a Zacks #3 Rank on the stock, which translates into a short-term rating of Hold. 

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
CENTURY ALU… CENX 22.53 +4.50%
ERBA DIAGNO… ERB 2.91 +4.30%
PLANAR SYST… PLNR 4.31 +3.86%
MALLINCKROD… MNK 72.17 +3.83%
GTT COMMUNI… GTT 12.06 +3.52%