Back to top

Analyst Blog

Xilinx Inc. (XLNX - Analyst Report) reported adjusted earnings per share (EPS) of 47 cents in the fourth quarter of fiscal 2013, beating the Zacks Consensus Estimate of 45 cents and the year-ago earnings of 44 cents a share.

Revenues

Xilinx generated total revenue of $532.2 million, down 4.8% from the year-ago quarter but up 4.3% sequentially. The year-over-year decline was due to weaker-than-anticipated sales from Industrial, Aerospace & Defense and Consumer & Automotive end markets, partially offset by better performance in the Communications & Data Center end markets.

Year over year, North America, Europe and Japan declined 7.0%, 9.0% and 10.0%, respectively, while Asia Pacific grew 3.0%. New product sales increased 86.0% year over year, driven by higher sales of Kintex-7 and Virtex-7 FPGAs. The company stated that its 28 nanometer families gained much traction during the quarter. But the company generated soft revenues from Mainstream and Base products.

Operating Results

Gross margin inched down to 66.1% from 66.4% in the year-ago quarter, primarily attributable to continued focus on yield improvement, cost reduction and favorable customer mix. Operating margin increased to 27.7% from 26.4% in the year-ago quarter due to lower expenses. Research and development expenses declined 3.6%, while selling, general and administrative expenses dropped 0.6%.

Balance Sheet & Cash Flow

During the quarter, Xilinx generated $173.7 million of cash from operations and incurred $6.2 million in capital expenditure. Xilinx paid $57.8 million in cash dividends. Xilinx ended the quarter with cash, equivalents and short-term investments of $1.71 billion, flat sequentially.

Xilinx increased its quarterly dividend of 3 cents per share to 25 cents per share.

Guidance

Xilinx stated that the backlog entering into the first quarter was up sequentially. The company also expects revenues from all end markets and 28-nanometer products to increase sequentially. Consequently, Xilinx expects sales to be up 1% to 5% sequentially in the first quarter of fiscal 2014 with support from higher revenues from all geographic regions, barring Europe.

Gross margin is forecast to be in the range of 66%–67%. Operating expenses are expected to be around $206.0 million, including approximately $2.0 million of amortization of acquisition-related intangibles. Other income and expense is expected to be $8 million. Fully diluted share count is expected to be approximately 277 million. Effective tax rate is expected to be approximately 13 –14%.

Xilinx plans to ship 20-nm product portfolio, including the next-generation 8 series All Programmable FPGAs and second generation of 3D ICs and SoCs by the June quarter.

Conclusion

Xilinx’s fourth quarter results were decent with the bottom line beating the Zacks Consensus Estimate. Year over year, revenues fell but earnings per share improved due to cost optimization. However, the first quarter guidance was encouraging, which reflected some recovery in the semiconductor market on the back of expected higher spending.

The company’s transition into 28nm nodes, shipment of 20nm nodes and recovery in the semiconductor market are catalysts. But stiff competition from Altera Corp. (ALTR - Analyst Report) and dwindling PC (significant consumer for semiconductor chips) market keeps us concerned for the near term.

Currently, Xilinx has a Zacks Rank #3 (Hold). We would like to recommend other technology stocks, which are really doing well. You can consider Atmel Corp. (ATML - Analyst Report) and Symantec Corp. (SYMC - Analyst Report) with a Zacks Rank #2 (Buy).

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