SAN FRANCISCOAn investment analyst raised revenue estimates for programmable logic vendors Xilinx Inc. and Altera Corp. Tuesday (April 6), saying both have room for continued near-term growth despite recent concerns over capital expenditure cuts by China's telecommunications companies.
Ian Ing, an analyst with Broadpoint AmTech, wrote in a report that Xilinx and Altera should deliver better-than-expected results for the March quarter and guidance for the June quarter, as non-China infrastructure spending and recovering industrials more than offset expected conservatism.
Based on Broadpoint's checks, the firm believes that China OEMs could still increase spending by 3 to 5 percent sequentially in the June quarter as India 3G builds and emerging market exposure more than offset domestic carrier weakness, Ing wrote.
Some analysts have warned in recent weeks that 2010 capital expenditures reductions by China's three major telecomm vendors of more than 20 percent overall could be a blow to component suppliers, including programmable logic vendors.
Ing wrote that checks indicate sustained strong order patterns for Xilinx and Altera at OEMS, as they attempt to build buffer stocks for the second half of the year from both direct and distribution channels.
While some analysts have also expressed concerns that Xilinx and Altera may be shipping too much product, which could come back to bite them later this year, Ing disagrees. "We believe over-shipment concerns are mitigated, as small customers continue to get insufficient product from distribution and just-in-time delivery of expensive PLDs from hubs reduces the desire for safety stock," he wrote.
Ing said Broadpoint continues to favor Xilinx over Altera for better exposure to near-term trends in wireless infrastructure spending.
Ing raised Broadpoint's revenue estimate for Xilinx for the March quarter to $528.7 million from $521 million and increased the firm's estimate for Xilinx' revenue in the June quarter to $549 million from $531.5 million. Broadpoint now estimates that Xilinx will have sales of $1.83 billion for 2010, up from a previous estimate of $1.26 billion. The firm upped its 2011 estimate on Xilinx' revenue to $2.16 billion from $2.01 billion.
For Altera, Ing increased Broadpoint's revenue estaimtes for the March quarter to $396 million from $390 million and for the June quarter to $411.9 million from $392.5 million. Broadpoint increased its Altera revenue estimate to $1.63 billion from $1.57 billion for 2010 and to $1.71 billion from $1.65 billion for 2011.
Broadpoint maintains a "buy" rating on Xilinx stock with a price target of $30. For Altera, Broadpoint maintains a "neutral" rating and increased its price target to $27 from $26. Shares of Xilinx and Altera traded at $26.34 and $25.08, respectively, in morning trading Tuesday.