Altera (ALTR)

Q1 2011 Earnings Call

April 26, 2011 4:45 pm ET

Executives

Ronald Pasek - Chief Financial Officer, Principal Accounting Officer and Senior Vice President of Finance

John Daane - Chairman, Chief Executive Officer and President

Unknown Executive -

Analysts

Shawn Webster - Macquarie Research

Uche Orji - UBS Investment Bank

Ian Ing - Gleacher & Company, Inc.

Tristan Gerra - Robert W. Baird & Co. Incorporated

Glen Yeung - Citigroup Inc

Parker Paulin - Wells Fargo Securities, LLC

Auguste Richard - Piper Jaffray Companies

Christopher Danely - JP Morgan Chase & Co

Ryan Goodman - CLSA Asia-Pacific Markets

Hans Mosesmann - Raymond James & Associates, Inc.

Gabriela Borges - Goldman Sachs Group Inc.

Vivek Arya - BofA Merrill Lynch

Unknown Analyst -

Ambrish Srivastava - BMO Capital Markets U.S.

Presentation

Question-and-Answer Session

John Daane

Compare to:
Previous Statements by ALTR
» Altera's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Altera Corporation Q2 2010 Earnings Call Transcript
» Altera Corporation Q1 2010 Earnings Call Transcript

Yes, in terms of lead times, first of all, there's no issue with wafer supply. There's no issue with any of the PLCC or QFP types of packages. The issue really breaks down to flip chip and wirebond substrate packages which are used more on the higher-end product lines from materials coming out of Japan. We have been able to meet customer forecast and customer demand in the near term and we anticipate through Q3. Orders for new unforecasted demand for those chips that are affected, flip chip, but more predominantly the wirebond substrate are eight to 12 weeks, but if customers were forecasting or previously had orders, the lead times are unaffected. So at this point, generally, I would say most, every product is fairly normal. Again, for anybody that's looking for upside product on the products that are affected, lead times are eight to 12 weeks. For those that were ordering at our forecast, they see no effect at all.

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Ambrish Srivastava - BMO Capital Markets U.S.

Thank you, sir.

Operator

And we'll take our next question from Christopher Danely with JPMorgan.

Christopher Danely - JP Morgan Chase & Co

Thanks, guys. Any guess on how OpEx should trend at least on a relative basis for next year?

Ronald Pasek

Chris, this Ron. A little early to do that. We haven't even really begun our planning process yet. I did update OpEx on the SG&A side for this year, and maybe next quarter if there's a change, I'd update R&D as well, but little early to think about that at this point.

Christopher Danely - JP Morgan Chase & Co

Sure. And then one more longer-term question. 40-nanometer continues to ramp nicely. What would be your best guess on when that peaks as a percent of your revenue?

Ronald Pasek

So if tradition holds [ph], it's a fairly predictable pattern. We're looking at 15 to -- well, actually 18 to 24 more months. We're really starting the ramp of revenue at this point, and we had two years of Prototyping, and now you're starting to see the growth through this year, you'll see it through next year. So roughly, I'd say 18 to 24 months.

John Daane

Even though that product line is early and it's, if you look at, for instance Stratix IV, it's early in its product life, it's now the largest product for Altera in the Q1 quarter. So you'll see a lot of strength, a lot of growth and, as Ron points out, a couple more years of solid growth in front of it [ph].

Christopher Danely - JP Morgan Chase & Co

Great, thanks.

Operator

And we'll take our next question from Glen Yeung with Citi.

Glen Yeung - Citigroup Inc

John, your guidance is flat at 5% [ph] and I think you said that every end market would be down except for Wireless. I wondered if that's right. And then a follow-on to that is, if it gets to the upper end of the range, can it only be Wireless or do you need to see other businesses contribute to get to the upper end of the range?

John Daane

Yes. So to answer it, we provide four groups. We expect three of the groups to be flat to slightly down, one of the groups being Telecom & Wireless to grow. Actually, when you look at it, there are 11 submarkets, some of those markets are growing, some of those markets are decreasing. So that's -- when you put them all together into four categories, that's what you get. In terms of the major changes, I would say for Q2, the Wireless market we expect to be up, 3G, 4G, microwave, automotive should be up strongly, consumers should be up strongly. The one that I would say would be notable down is military on program timing, and then the rest are all sort of in the middle somewhere. In terms of growth or being able to hit the high end, at the end of the day, it's a mix, it's a forecast. We're never exactly spot-on, pretty close last quarter, and we can have changes in any of those that could drive the business to one end of the range or the other or even outside of the range one way or the other.

Glen Yeung - Citigroup Inc

Okay. Second question is around VMI. The first part of it is, what portion of your business is VMI now and what was it last quarter and last year? And then secondly, to that, as you move more to VMI, what should we expect to see in terms of differences in the way you manage inventory and differences in the kind of feasibility that you have?

Ronald Pasek

Yes, so, Glen, it's still a fairly small piece of total, something -- I might be giving you a percentage, but it's not significant. But the piece [ph] of it is significant as we're seeing it grow, and so that's why -- and it's growing in some of our large customers, so that's why I pointed it out in the script. So what's happening is, they're giving us a forecast and we kind of know what to build based on that forecast. But they're not booking it until -- officially booking until they pull it out of VMI. So that's the change. You don't see it in traditional backlog anymore. And that's the only change. I mean it sort of affects what we see as book to bill, it affects our turns number, but we still have good visibility on what the customer demand is.

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