Revs better, gross margins 3% below the street on back of big product mix shift away from higher priced sales to government and industrial customers and stronger sales to wireless communication customers. The China 3G build has begun in earnest and Altera/Xilinx are benefiting near-term. Sustainability of this spending is in question. The company said it will ultimately be a 42 billion dollar spend from China and they believe it has just begun. Several analysts have suggested this spend may be front end loaded for 2009 and are cautious as a result.
Gross margins are projected to grow throughout 2009 off a significantly lower level than prior models. While EPS numbers likely don’t change much, they probably ought to drift lower as the higher revenue is being offset by lower margins. 2010 could prove interesting as the company says they’re getting significant design wins in their new products… but there’s likely chop between now and then.
Revenue guidance of +2-7% is better than the street’s flattish modeling. Recent Asian press reports have indicated Altera’s ordering patterns are more in line with a 10% sequential increase for 2Q. The company said their book to bill was significantly over 1 exiting the quarter but remained somewhat cautious – as if they expect business to slow in the second half of the quarter (or they’re being conservative… its unclear at this time.)
I own some Altera and I view the quarter as a disappointment.
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