Xilinx Earnings Call Nuggets: 4G Activity, End Markets

On Wednesday, Xilinx Inc (NASDAQ:XLNX) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

4G Activity

Romit Shah – Nomura System: You mentioned that wireless this quarter would be down more than wired. I was hoping you could drill down into 4G specifically and talk about some of the activity you are seeing today in North America and China?

Jon Olson – SVP and CFO: This is Jon. So from a wireless perspective the strength that we continue to have is around LTE deployments in North America – in the US, in Korea and as well as Japan, and while those rollouts are continuing into the next quarter, we do think that there always – typically there’s been some bumpiness along the way. But we still are shipping I would say the biggest portion of our Virtex family FPGAs that go into the wireless basestation segment into the LTE piece. There are some additional GSM and TD-SCDMA activity going on for China but the capital spend is actually relatively low and as they prepare for in 2013 a bigger rollout, there are some systems going into that early part of that deployment, but relative to the lion share of what we see not only for this past quarter, we just announced as well as this next quarter, it is primarily LTE and it’s primarily in North America, Korea and South Korea and Japan.

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Romit Shah – Nomura System: Jon, you were saying that it’s a little bumpy, were you referring to China specifically?

Jon Olson – SVP and CFO: Yeah, China is really the bumpy part. The North America part seems to be still pretty steady, as best as we can tell. As you know, we shipped to people who then shipped to a variety of locations. We don’t always know exactly where every unit is going in every basestation, but based on our communications with our customers, that’s really where that strength was. We noted that we had stronger than anticipated performance this quarter in wireless and it’s backing off just a little bit, but it still quite good and again it’s healthy (EBIT).

Romit Shah – Nomura System: Then as a follow-up Moshe, you mentioned that your 28-nanometer revenue doubled in the quarter to about I think $20 million plus. Altera has been saying that the majority is tied to SSI and therefore won’t go into production. Could you give us a split how much is SSI?

Moshe Gavrielov – President and CEO: The revenue came from all five families and the two of the five families, there is no competition. One of them is SSI, and SSI goes into numerous applications, one is ASIC prototyping and there as long as it’s the largest FPGA out there, then you keep getting additional wins in that category, so there is a scaling factor. It’s not that it’s a one hit wonder in the first three months of the product line. It actually continues until there is a larger product line available from any other source, so it actually will continue and we will continue to see growth on that. In addition there is a lot of design wins that go into the high-end of the wired communications and the A&D applications and those do go into production, so you can think of it as having this dual personality, (both are with) scale, and again it’s only part of the revenue, but even that part goes into some applications, which do go into production, others would just repeat themselves due to whole host of other reasons.

Jon Olson – SVP and CFO: We did ship to all those customers, there are reasons — for all those reasons that Moshe talked about within this last quarter, so we did ship SSIT very broadly across the application set it goes to. We tend not to want to parse out our $20 million about which individual products and product families because it does get — it’s actually hard for us to keep all that tracking up because it’s not important to us necessarily to track one versus the other but we did ship in a prototype and we also shipped into to coms, in the A&S, wired coms and A&D this quarter and we’re very attuned in this fact there is a lot of noise around the fact that SSIT only means prototyping and as we really far from the truth from it.

End Markets

Ambrish Srivastava – BMO Capital Markets: Question on just on the end markets, there seems to be a little more noise and actually you had press release this morning on TDLT. What are you guys seeing? Are you seeing any early indications in that market or is it still too early to call? And then my follow up is really trying to understand the non-communications part of the business Moshe or Jon. I’m looking at industrial and the other segments, and if you are taking share from the non-PLDs, shouldn’t they be acting a little bit better than what we’re seeing from the more generic analog kind of company? And I’m talking about in terms of Q-over-Q decline.

Moshe Gavrielov – President and CEO: Well, there’s actually quite a few questions there. So tDLT it’s still early days. It has, as Jon indicated, the majority of the roll out has been in North America. There is still a tremendous amount of rollout that is required in North America and there is an imbalance between the carriers in North America in terms of the level of penetration. One is well ahead of the others. The others need to catchup, otherwise they will have a tremendous competitive disadvantage, in particular as the smartphones become more and more prevalent and suck more and more bandwidth, so there is no doubt that there’s a need for tremendous upgrades throughout North America, which will happen undoubtedly. The question is not if it will happen, it’s only question of when it will happen. It has to. The consumer requirement is such that it’s about the only solution that can handle that. So that’s North America. Elsewhere as Jon highlighted, it’s been – the rollouts have started in Japan and Korea but there is room for significant upgrades there and then the rest of the world, in particular China and Europe have not started anything equivalent to that and so there is significant room for deployment there. So the consumer demand in the smartphones are making this a non-discretionary decision. It’s just (indiscernible) and how quick and when it will start in other areas of the world. So no, we’re hearing that consistently from the companies we work with who are the equipment suppliers.

Jon Olson – SVP and CFO: Just one more comment on the first question and I’ll try to answer the second question for you Ambrish. I tried to find out exactly if we could figure out how many basestations were being sold into China that were advanced technology, because I keep saying well they are doing some demos and prototypes, and whatever, and as best as we could find out, there is a few thousand that are going to get built or deployed in this quarter, which is certainly not anywhere near what it would take for a rollout and again the best information we have is mid-2013 on the TD-LTE business. So it’s yet to come, but we are not really experiencing it much there.

Ambrish Srivastava – BMO Capital Markets: But Jon, there is a few thousand. So that’s good to know that this not (wafer) basestations?

Jon Olson – SVP and CFO: Yeah, that’s right. And again, as good as information as we can get about it, that’s what I was able to get to try to figure out really when we might see a better ramp because of China CapEx spending. On your second question, there’s kind of two ways to look at this. One is our industrial has been relatively weak the last couple of quarters and in fact even looking through this coming quarter end right now, the industrial business in Europe is starting out very weak and the backlog is very weak and distribution, information seems to be very weak in Europe in this particular category, so even though we are forecasting a little bit of growth, it’s really kind of off of I would say relatively low base and I would be surprised to see if anybody else has very bullish numbers on it and industrialize as other companies will obviously be watching that. With your question around shouldn’t you see maybe a better uptake because of displacing the SSP. The real winner for us in that area is going to be our zinc product and the designing time we had a good uptake. It is still a new category and we are developing and we are getting lot of success and we’re getting design wins, but quite frankly we aren’t on the acceleration knee of the revenue curve yet and it’s going to take a few more quarters before we get there and that’s really the part that’s going to I think show up in a big way against the SSPs and industrial category.

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