Xilinx (XLNX)

Q2 2012 Earnings Call

October 19, 2011 5:00 pm ET


Moshe N. Gavrielov - Chief Executive Officer, President and Director

Rick Muscha -

Jon A. Olson - Chief Financial Officer, Principal Accounting Officer and Senior Vice President of Finance


Brian Peterson - Raymond James

John Pitzer - Crédit Suisse AG, Research Division

Glen Yeung - Citigroup Inc, Research Division

David Johnson

David M. Wong - Wells Fargo Securities, LLC, Research Division

Ruben Roy - Mizuho Securities USA Inc., Research Division

Christopher J. Muse - Barclays Capital, Research Division

Uche X. Orji - UBS Investment Bank, Research Division

James Schneider - Goldman Sachs Group Inc., Research Division

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Sandeep Shyamsukha - Auriga USA LLC, Research Division

Srini Pajjuri - Credit Agricole Securities (USA) Inc., Research Division

Mark Lipacis - Jefferies & Company, Inc., Research Division

Shawn R. Webster - Macquarie Research

Tristan Gerra - Robert W. Baird & Co. Incorporated, Research Division

Vivek Arya - BofA Merrill Lynch, Research Division

Ambrish Srivastava - BMO Capital Markets U.S.



Good afternoon. My name is Marvin and I will be your conference operator. I would like to welcome everyone to the Xilinx Second Quarter Fiscal Year 2012 Earnings Release Conference Call. [Operator Instructions] I would now like to turn the call over to Rick Muscha. Thank you. Mr. Muscha, you may begin.

Rick Muscha

Thank you, and good afternoon. With me are Moshe Gavrielov, CEO; and Jon Olson, CFO. We will provide a financial and business review of the September quarter, and then we'll open the call for questions.

Let me remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially.

We refer you to documents the company files with the SEC, including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This conference call is open to all and is being webcast live. It could be accessed from our Xilinx Investor Relations website.

Let me now turn the call over to Jon Olson.

Jon A. Olson

Thank you, Rick. During today's commentary, I will review our September quarter results. I will conclude my remarks by providing guidance for the December quarter.

Xilinx sales were $555.2 million in the September quarter, a decrease of 10% sequentially. This was in line with the revised sales guidance we provided on September 20, but lower than the forecast we provided during our last earnings conference call due primarily to weaker than anticipated business from customers in the communications and industrial and other categories.

Gross margin was 63.9%, slightly better than anticipated, driven primarily by favorable customer mix and product mix. Operating expenses were $200 million, less than guided due to lower than expected restructuring charges as well as lower variable, R&D and legal expenses.

Operating margin was $155 million or 27.9% for the quarter. New product sales decreased 5% sequentially during the quarter, due to declines from Virtex-5 which were impacted by decreases in Wired Communications that more than offset increases in Wireless business.

Spartan-3 sales were also impacted by declines from Wired Communications during the quarter. 40 and 45-nanometer product sales increased sequentially, led by strong gains from Spartan-6. 28-nanometer products, particularly Kintex-7, contributed to new product sales shipping units to more than 50 customers during the quarter.

Mainstream products decreased 15% sequentially and base products declined 14% sequentially. Sales from Asia-Pacific were particularly weak during the quarter, declining 21% sequentially due to weak sales from Wired and Wireless Communications business. Asia-Pacific sales represented 31% of total sales in the September quarter, down from 35% in the prior quarter, and down from 35% in the same quarter a year ago.

North American sales were down 11% sequentially, driven primarily by declines from Communications and industrial and other categories. For the September quarter, North American sales represented 29% of total sales, down from 30% in the prior quarter and flat with 30% in the same quarter of the prior year.

European sales were essentially flat for the quarter, as the sales increase in Communications was offset by sales declines from all other end market categories. European sales represented 29% of total sales in the quarter, up from 26% in the prior quarter, as well as the same quarter of the previous year.

Lastly, Japan sales increased 5% sequentially in the quarter, representing 11% of total sales with strength from all end market categories, with the exception of Data Processing.

Let me now turn to a discussion of end markets. Communications sales declined 12% sequentially, representing 44% of total sales driven predominantly by Wired Communication decreases.

Industrial and other sales decreased 10% sequentially to represent 33% of total sales driven primarily by decreases from industrial, scientific and medical and test and measurement. Defense sales were down slightly.

Consumer and Automative sales increased 2% sequentially to 16% of total sales, as increases in consumer and audio/video broadcast offset a slight decline in Automotive.

Data Processing sales declined 17% sequentially as declines in computer and Data Processing more than offset a slight increase from storage applications.

Net income for the quarter was $126 million or $0.47 per diluted share. Other income and expense was a net expense of $8.6 million, slightly higher than guided due primarily to slightly higher interest expense associated with the fair market value of certain elements of our convertible debt.

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