SAN FRANCISCO A mold compound issue that forced programmable logic supplier Xilinx Inc. to issue a substantial recall of Spartan-3 low-cost FPGAs could take weeks to rectify, according to Satya Chillara, an analyst at American Technology Research.
In a research note published Friday (July 7), Chillara said American Technology believes that a new mold compound has to be re-qualified for the Spartan-3 devices. Based on further analysis, Chillara said through the note, the recalled devices are high-density FPGAs, which carry higher average selling prices than other Spartan devices. The firm estimates that between 70 and 80 percent of the recalled devices have 1 million gates or more, putting them at the high end of the Spartan low-cost FPGA family.
As first reported by EE Times, Xilinx, citing a packaging-related technical problem, last month issued a recall of Spartan-3, Spartan-3E and Spartan-3L FPGAs made between early September 2005 and late April of this year. In a research note published last week, American Technology Research said it believes the recall is a material issue and could cost Xilinx between $20 million and $30 million in revenue.
"We are inclined to suggest weakness in the September quarter given the re-qualification process a company has to go through," Chillara said Friday through the note. "Based on this outcome, we think management is going to be conservative with respect to guidance for the September quarter."
American Technology Research is projecting Xilinx revenue to be $486 million for both the June and September quarters. Both are slightly below consensus analyst expectations.
Xilinx, like dozens of other high-tech companies, is also facing a U.S. Securities and Exchange Commission (SEC) inquiry into the company's historical stock options granting practices.
"Although the stock has corrected 25 percent or more in the past few weeks due to the tech correction and SEC options inquiry, we believe the Spartan issue is material," the note read.
American Technology Research maintained its "buy" rating and $25 price target on Xilinx stock. Xilinx traded at $22.09 in early afternoon Nasdaq trading Friday.
Xilinx representatives could not immediately be reached for comment.