Altera Earnings Cheat Sheet: Increased Costs Strains Margins as Profit Drops

S&P 500 (NYSE:SPY) component Altera Corporation (NASDAQ:ALTR) reported its results for the third quarter. Altera designs and manufactures programmable logic devices, HardCopy ASIC devices, pre-defined design building blocks, cores, and associated development tools.

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Altera Earnings Cheat Sheet for the Third Quarter

Results: Net income for the semiconductor company fell to $185.4 million (57 cents per share) vs. $217.5 million (69 cents per share) a year earlier. This is a decline of 14.8% from the year earlier quarter.

Revenue: Fell 0.9% to $522.5 million from the year earlier quarter.

Actual vs. Wall St. Expectations: ALTR fell short of the mean analyst estimate of 59 cents per share. It fell short of the average revenue estimate of $542.2 million.

Quoting Management: “Customer reaction to changing global macroeconomic conditions reduced industry demand. Despite this near-term deceleration we saw further growth from our 40-nm products and are very pleased with the successful launch of our 28-nm FPGAs. With our development software publicly available since mid-2010, we are already shipping to initial production-based demand for 28-nm Stratix V FPGAs,” said John Daane, president, chief executive officer, and chairman of the board. “There are more 28-nm products to be rolled out, including Altera’s SoC FPGAs, which integrate a multi-core ARM A9 processor into our Cyclone V and Arria V FPGA fabric.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the second quarter, net income rose 18.8% from the year earlier, while the figure increased 46.3% in the first quarter, more than twofold in the fourth quarter of the last fiscal year and more than threefold in the third quarter of the last fiscal year.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the third quarter of the last fiscal year, which saw revenue rise 84%.

Gross margin shrank two percentage points to 68%. The contraction appeared to be driven by increased costs, which rose 5.7% from the year earlier quarter while revenue fell 0.9%.

The company fell short of forecasts after beating estimates in the previous two quarters. In the second quarter, it topped the mark by one cent, and in the first quarter, it was ahead by 3 cents.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 64 cents a share to 59 cents over the last sixty days. For the fiscal year, the average estimate has moved down from $2.62 a share to $2.51 over the last sixty days.

Competitors to Watch: Lattice Semiconductor (NASDAQ:LSCC), Xilinx, Inc. (NASDAQ:XLNX), QuickLogic Corporation (NASDAQ:QUIK), Intel Corp. (NASDAQ:INTC), Texas Instruments Inc. (NYSE:TXN), Microsemi Corporation (NASDAQ:MSCC), Cypress Semicond. Corp. (NASDAQ:CY), ON Semiconductor Corp. (NASDAQ:ONNN), Broadcom Corporation (NASDAQ:BRCM), TranSwitch Corporation (NASDAQ:TXCC), and Aeroflex Holding Corp. (NYSE:ARX).

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(Source: Xignite Financials)