Altera Corp. today announced it will take further write-downs of excess inventory in the fourth quarter following a dismal year for semiconductor sales. But company executives said they believe revenue bottomed out in October.
The PLD supplier said it expects to post fourth-quarter revenue of approximately $162 million, down 7% from the $174.2 million posted in the third quarter. In October, the company projected a 5% to 10% revenue decline.
But with backlog building, and orders outpacing sales during November and December, Altera anticipates "modest" growth in the March-ending quarter.
The company declined to say what products or end-markets are leading the upward trend, but expects to provide guidance with its complete quarterly financial report on Jan. 22. Typically, Altera derives the bulk of its revenue from North American communications customers, the segment hardest hit by the downturn in 2001.
Chief financial officer Nathan Sarkisian said in a conference call with analysts that Altera will take a $35 million charge for excess inventory, primarily consisting of mainstream products, about half of which were reserved in June.
Since that time, market conditions worsened and several customers unexpectedly cancelled programs that were already in production, he said.
The write-down brings total inventory charges for 2001 to $151 million, and reduces Altera's stock on-hand to four months. The aim is to reduce chip reserves to less than three months, Sarkisian said.
Additionally, the company will record an $18 million asset write-down, consisting of surplus manufacturing assets, the write-off of a minority investment, and the book value of Altera's Northwest Logic design services subsidiary, which was quietly spun off in the fourth quarter.
According to Sarkisian, Altera had acquired Northwest Logic to help customers who were design-resource-constrained. But when the environment changed, "it made sense for all parties to allow Northwest Logic to pursue business on its own," he said.
The design firm will remain an authorized consultant for Altera customers.