Profit Slumps at Altera

Margins fall from a year earlier.
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Second-quarter earnings slumped at Altera (ALTR) - Get Report as margins fell from a year earlier and are expected to tread water in the quarter now under way.

In recent after-hours trading, shares of Altera ticked up 12 cents, or 0.5%, to $22.65 on Instinet.

The chipmaker said after the bell Monday that net income fell to $67.6 million, or 18 cents a share, from $75.3 million, or 20 cents a share, a year earlier.

Gross profit margin was 68.3% vs. 69.9% a year earlier.

Sales rose 6% to $285.5 million.

The earnings per share figure matched the Thomson First Call consensus estimate, while revenue slightly edged Street expectations of $277.3 million.

During a midquarter update on May 31, the company didn't materially alter its original, earlier targets that called for a sequential revenue increase of 4% to 5%, for a range of $275.4 million to $278 million. Altera's midquarter update predicted sales would be at the "higher end" of that range.

Also during the update, Altera announced it would record a tax benefit of $15 million to $20 million due to two tax audits, and that it would book a $21 million tax charge to repatriate $400 million in foreign-based earnings.

Altera said a second-quarter tax provision included a $21 million charge related to the planned repatriation of $400 million in foreign earnings pursuant to the provisions of the American Jobs Creation Act of 2004. In addition, the company recorded a tax benefit of approximately $15.2 million arising primarily from the settlement of federal and California income tax audits during the quarter. The net impact of these two items added $5.8 million to the company's second-quarter tax provision, reducing earnings per share by a penny.

For the third quarter, Altera said it expects third-quarter sales to grow sequentially by 1% to 3%, implying a range of $288.4 million to $294.1 million, above the current First Call consensus estimate of $283.3 million. The company expects more moderate growth due to typical seasonal slowing in Europe.

Altera said it expects margins in the third quarter of 68% to 69%, unchanged from its prior second-half gross margin projections.

Altera makes programmable microchips used in a wide variety of applications, such as communications, storage and servers, and consumer and industrial products.

Last week, Altera's largest competitor,


(XLNX) - Get Report

, met its financial targets for its fiscal first quarter and

predicted sales would be flat to up 4% for the second quarter.