- Xilinx (NASDAQ:XLNX) used its mid-quarter update to lower September qtr revenue guidance. Several firms are commenting:
* Banc of America notes the outlook is below their prior est. of $472m (-2%) and cons of $473m (-1.8%) - but not a total surprise given firm's previewed expectations which had suggested a bias to the low-end of prior guidance. Further, the absence of GM commentary suggests that XLNX is still comfortable with its 61-62% GAAP GM target. They are however lowering their CY07 pro-forma EPS est. from $1.42 to $1.36 to reflect the lower sales outlook and revising tgt down from $32 to $30.
Firm believes that Xilinx's wireline and wireless sales were impacted by lower demand from APAC customers (inc. US OEMs with Asian subcons as well as local Asian OEMs). This weakness is largely attributable to disruptions stemming from the ongoing consolidation at some of Xilinx's customers.
They believe the weak outlook was widely anticipated, as investors were not pricing in much in terms of good news on the stock. Xilinx's weak outlook is more reflective of a typically challenging seasonality in Sept. (coupled with the aforementioned disruptions at customers) than a systemic issue with Xilinx's fundamentals. The good news is that comparisons post today's revised outlook become easier heading into the seasonally strong Dec-Mar period, and with a relatively lean inventory situation (both internally and distribution), they believe XLNX (at the very least) is poised to benefit from inventory replenishment in coming qtrs.
Maintains Buy.
* Merrill Lynch notes the revenue shortfall is largely attributed to the weakness in the communications end-market, with both wireless and wireline performing worse than expected. Given that Xilinx has much higher exposure to the wireless infrastructure market than Altera and that Altera did not revise its outlook, they believe wireless infrastructure is the main culprit. From a product standpoint, Virtex-II and Virtex-II Pro will be most impacted by this revenue shortfall, thus dragging down the growth rates of the new and mainstream product categories.
Xilinx was able to manage combined internal and distributor inventory days down to the corporate target of 90-120 days last quarter, but the firm expects this quarter's revenue shortfall will move inventory days back up to the 130 level. The company has not made adjustments to wafer starts as it believes orders for the December and March quarters are good. Even if the company decides to make any adjustment to wafer starts, they expect the impact will not show up on the company's balance sheet until the Mar-07 quarter.
Firm is lowering Xilinx's GAAP earnings estimate for the Sep-06Q from $0.25 to $0.23, and for the fiscal 2007 (March) from $1.00 to $0.96. Neutral rating on Xilinx stands.
* JP Morgan notes that despite the lowered guidance, they reiterate Overweight recommendation on Xilinx as firm's C07 EPS estimate is only lowered by $0.04 and Xilinx is about to enter its two seasonally strongest quarters. According to the analyst the stock has bottomed during the September quarter four out of the last five years.
Notablecalls: Not actionable but good to know category. Continue to be negative on Semi space.
* Banc of America notes the outlook is below their prior est. of $472m (-2%) and cons of $473m (-1.8%) - but not a total surprise given firm's previewed expectations which had suggested a bias to the low-end of prior guidance. Further, the absence of GM commentary suggests that XLNX is still comfortable with its 61-62% GAAP GM target. They are however lowering their CY07 pro-forma EPS est. from $1.42 to $1.36 to reflect the lower sales outlook and revising tgt down from $32 to $30.
Firm believes that Xilinx's wireline and wireless sales were impacted by lower demand from APAC customers (inc. US OEMs with Asian subcons as well as local Asian OEMs). This weakness is largely attributable to disruptions stemming from the ongoing consolidation at some of Xilinx's customers.
They believe the weak outlook was widely anticipated, as investors were not pricing in much in terms of good news on the stock. Xilinx's weak outlook is more reflective of a typically challenging seasonality in Sept. (coupled with the aforementioned disruptions at customers) than a systemic issue with Xilinx's fundamentals. The good news is that comparisons post today's revised outlook become easier heading into the seasonally strong Dec-Mar period, and with a relatively lean inventory situation (both internally and distribution), they believe XLNX (at the very least) is poised to benefit from inventory replenishment in coming qtrs.
Maintains Buy.
* Merrill Lynch notes the revenue shortfall is largely attributed to the weakness in the communications end-market, with both wireless and wireline performing worse than expected. Given that Xilinx has much higher exposure to the wireless infrastructure market than Altera and that Altera did not revise its outlook, they believe wireless infrastructure is the main culprit. From a product standpoint, Virtex-II and Virtex-II Pro will be most impacted by this revenue shortfall, thus dragging down the growth rates of the new and mainstream product categories.
Xilinx was able to manage combined internal and distributor inventory days down to the corporate target of 90-120 days last quarter, but the firm expects this quarter's revenue shortfall will move inventory days back up to the 130 level. The company has not made adjustments to wafer starts as it believes orders for the December and March quarters are good. Even if the company decides to make any adjustment to wafer starts, they expect the impact will not show up on the company's balance sheet until the Mar-07 quarter.
Firm is lowering Xilinx's GAAP earnings estimate for the Sep-06Q from $0.25 to $0.23, and for the fiscal 2007 (March) from $1.00 to $0.96. Neutral rating on Xilinx stands.
* JP Morgan notes that despite the lowered guidance, they reiterate Overweight recommendation on Xilinx as firm's C07 EPS estimate is only lowered by $0.04 and Xilinx is about to enter its two seasonally strongest quarters. According to the analyst the stock has bottomed during the September quarter four out of the last five years.
Notablecalls: Not actionable but good to know category. Continue to be negative on Semi space.
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