SAN FRANCISCOóProgrammable logic vendor Altera Corp. Thursday (April 19) said first quarter sales came up well short of analysts' expectations and the company's own revised guidance amid continued inventory reductions, weakness in the communications end market and tight foundry capacity at the leading edge.
Altera (San Jose, Calif.) reported first quarter sales of $383.8 million, down 16 percent from the fourth quarter of 2011 and down 28 percent from the first quarter of 2011. The company reported a net income for the quarter of $115.8 million, down 21 percent from the previous quarter and down 48 percent from the year-ago quarter.
Altera's first quarter revenue came up well short of consensus analysts' expectations. The sequential decline was even more severe than the company predicted in March, when it cut its first quarter sales target to between $415.6 million and $425.8 million. Ronald Pasek, Altera's chief financial officer, said in a conference call with analysts following the quarterly report that the larger shortfall was due to a number of factors, include decreased demand late in the quarter from telecomm and wireless customers and inadequate supply to fill turns orders late in the quarter.
"As we exited Q1, we experienced a lengthening of foundry lead times mainly for 28- and 40-nm products," Pasek said. In anticipation of tightening foundry supply, Pasek said Altera secured more inventory and as a result expects its inventory to increase in the second quarter, but remain within the company's goal of three to four months supply on hand.
Tight foundry capacity, particular at the 28-nm, has been an ongoing issue for chip firms offering leading-edge devices. Qualcomm Inc. said Wednesday that it was moving to secure 28-nm capacity from other foundry vendors due to tight supply at Taiwan Semiconductor Manufacturing Co. Ltd. Qualcomm said it expects lack of 28-nm capacity to impact its sales over the next two quarters.
"The first quarter sequential revenue declines was caused by continued inventory reduction across most of our verticals, coupled with weakness in the communications end market," said John Daane, Altera's chairman, president and CEO, in a statement.
Daane said capacity was "very tight" at 28- and 40-nm. Daane said the equipment set for 28- and 40-nm is mostly the same, with the same tools used for both process technologies. "So if one is tight, correspondingly, the other is naturally tight," Daane said.
Altera said it expects second quarter sales to increase 14 to 18 percent sequentially to between $437.5 million and $452.9 million. Daane said the company saw strong bookings in March and the first half of April and expects double-digit sequential growth across several of the end markets the company serves.
Nevertheless, the midpoint of Altera's guidance came up short of consensus analysts' expectations of roughly $452 million, according to Yahoo Finance.