Xilinx Investors Wanted More Upside

Earnings and revenue are both up 8% over last year, but the stock has risen 25% year to date.
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Updated from 4:50 p.m. EDT

Xilinx

(XLNX) - Get Report

posted in-line June quarter results that showed respectable growth from last year's levels. But bullish investors who've pushed the stock up 25% this year sold the stock on the news, after the company failed to offer deliver any additional upside.

After hours, shares slid $1.93 or 7.3% to $24.60. In regular trading, the stock had closed down 84 cents, or 3.2%, to $25.69.

"I think the quarter came in exactly as expected," said Eric Rothdeutsch of Friedman Billings Ramsey, who has a market perform rating on the stock. His firm has no banking relations with Xilinx. Sales results landed in the middle of the range Xilinx had outlined, and guidance was as expected, he noted. "But seasonally it will be a tough summer.

EMC

(EMC)

has been their biggest customer and it's been migrating to ASICs from PLDs,

programmable logic devices, Xilinx's stock in trade."

The chipmaker said it sold $313 million worth of silicon in the quarter, up 8% from a year ago. Analysts were looking for $315 million in sales.

Gross margins of 60.1% were up slightly from 58.4% last year, showing a slight increase in profitability.

Net income of $46.2 million amounted to 13 cents per share, also up 8% from a year ago, which included a pretax $6.4 million charge for litigation costs.

After stripping out the charge, Xilinx would have met Wall Street's consensus earnings of 15 cents, notes Rothdeutsch.

In the June quarter consumer and industrial end markets saw solid growth while storage and wireless communications were relatively weaker.

CEO Wim Roelandts said on the conference call, "I think people are still living from day to day and customers are waiting until the last second to order. I don't see much inventory build-up. In the same vein our visibility continues to be very limited because a lot of business is turns business and you live literally from week to week."

For the September quarter, the company expects to draw 60% of sales from "turns business" -- orders which are placed and executed within the quarter, up from 54% in the June quarter.

For guidance, Xilinx said revenue should be flat to slightly up sequentially for its September quarter.

Analysts had penciled in expectations for $325 million in revenue in the quarter now under way, which would mark growth of 3.8% from June quarter results.

Roelandts said on the conference call that Xilinx expects the communications market to stay flat, storage and servers to decrease and consumer and industrial markets to be up. By geography, all regions should be flat except Asia-Pacific, which should see growth.