, sticking to a forecast first put forth in January, said Monday it expects revenue to be flat to slightly up in the March quarter.
In its monthly business update Monday, which came on a day when the outlook for chip growth seemed to dim, the maker of programmable logic devices, or PLDs, said it expects internal inventory levels to increase in the March quarter, while inventory at its distributors should remain flat.
Programmable logic devices are a type of semiconductor that customers program themselves. They are primarily used in the communications sector, which hasn't been as hard-hit by softening demand as the broader microprocessor and memory markets. All the same, inventories are a problem for the sector and will continue to weigh on growth for at least the first half of 2001.
Investors are watching for any sign of change in semiconductor demand to try to determine when sales will rebound after several weak months thanks to rising inventories of telecommunications products and a slowdown in personal computer demand. Most Wall Street analysts are listening to the chip companies' forecasts and planning on a turnaround in the year's second half. And some investors have already taken that as a sign that it's time to buy chip stocks. Since the end of 2000 the
Philadelphia Semiconductor Stock Index
has gained about 14%.
Investors weren't feeling so sure about the rebound on Monday though. The Xilinx news came after a day during which the
Semiconductor Industry Association
said that 2001 chip revenue growth likely won't reach its already downwardly revised 22% increase because of steep inventory levels. (The SIA's number is far above some industry estimates for growth of 7% or so in 2001). The SIA didn't provide a new estimate, but the news was enough to weigh on chip stocks and the SOX fell back more than 4%.
, which makes DRAM, or dynamic random access memory, a commodity chip, was one of the hardest-hit, giving up $2.92, or 7.1%, to finish regular trading $38.28.
Xilinx, which provided its monthly update after the close of regular trading, was changing hands after hours at $52.31 on
ECN. It finished regular trading at $50.88.
If history is any judge, PLD makers likely will outpace the industry's growth rate. In 2000, sales of PLDs increased by 88%, easily outpacing overall chip growth of 37%. But PLDs accounted for only a tiny percentage of that market, with sales coming in at $5.5 billion compared with the total $204 billion.
And in 1998, when the semiconductor industry contracted by about 8%, PLD revenue grew by about 6%,
pointed out in a research note recently. That's because PLDs are specialized and don't suffer the same type of price erosion.
But Xilinx competitor
isn't counting on much in terms of 2001 growth. It said during its quarterly earnings presentation in January that it expects 2001 revenue to increase 10% from 2000. Some other chipmakers, like
, declined to even guess at 2001 revenue growth.
Last week, Altera gave its monthly business update for January and reconfirmed that it expects revenue in the first quarter to fall about 5% from the fourth quarter. But the fact that Altera isn't straying from its guidance doesn't necessarily mean that analysts are confident the company will hit the consensus earnings estimate of 22 cents a share this quarter. Lehman, for instance, said in a note that February and March revenue will have to pick up strongly from January for the company to hit its estimate. (Lehman hasn't done underwriting for Altera.)