Skip to main content

If investors needed more proof that chips are mired in low-single-digit growth territory, they got it from


(ALTR) - Get Altair Engineering Inc. Class A Report


The company said today it expects to see sequential revenue growth this quarter of 4% to 6%, sticking with a prediction it made in its most recent earnings report.

That's in line with consensus estimates of $182 million for the quarter, representing a 5.6% sequential gain. Analysts expect Altera's June quarter earnings to remain flat with the previous quarter, 5 cents per share, according to Thomson Financial/First Call.

Earlier this week, rival


(XLNX) - Get Xilinx, Inc. (XLNX) Report

was rebuked by the market when it didn't raise revenue guidance for the current quarter, as some had hoped. It's since dropped 9.6%.

Altera, which makes a kind of semiconductor known as a programmable logic device, hadn't been expected to hoist guidance. But still, investors were clearly feeling skittish before its update: The stock traded on volume of 15 million shares, 177% higher volume than its 30-day average, and closing down 3.5%. It was up 1.2% in aftermarket trading.

This year, Altera's stock has fallen 21.8%, amid a bleary environment for tech spending.

"No matter how much you like Xilinx and Altera -- and Altera is one of the stronger companies out there, both in technology and overall as a company -- a good portion of their end markets are from communications companies," said Joseph Tou, an analyst at Pacific Crest Securities.

Altera's client roster includes battered telecom-equipment makers such as

TheStreet Recommends




Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

, and

Nortel Networks



In light of weak demand, expectations for PLD makers like Altera are still too rosy, by some accounts. "Both Altera and Xilinx are forecasting a return to 25-30% revenue growth for CY03 while Cisco has a revenue growth consensus of 16% for CY03," wrote Lehman analyst Dan Niles in a May 30 report. "Our issue with this is during one of the greatest tech spending bubbles ever, PLD revenues only grew at a 25% CAGR from 1995-2000 while Cisco's revenues grew 51%.

"It is hard for us to imagine PLD growth going back to the glory days while growth at Cisco runs at about one-third the levels of before," Niles wrote.

While the latest news from Altera will likely reinforce a sense of growing caution about tech's prospects in the current quarter, it pales in significance to tomorrow's midquarter update from


(INTC) - Get Intel Corporation (INTC) Report

, the 800-pound gorilla of the chip universe. Investors will be closely monitoring Intel's comments to get a sense of the broader outlook for the chip and PC market.