Altera Tops Estimates, Boosts Outlook

Altera reported Q2 results that bested analyst expectations amid cost reductions and increased new product sales. The microchip maker said it earned $80.5 million ($0.22/share), up from $77.3M ($0.21) a year ago, and $0.03/share above the average analyst forecast of $0.19. Sales came in at $320M, down from $334M in 2006, but better than the $313M analysts had expected. Helping boost earnings were lower costs as the company cut operating expenses by 7%. Sales of new products rose 26% from the previous quarter. Looking ahead, Altera said it now sees third-quarter revenue flat to 3% percent higher sequentially. Analysts had been expecting revenue of $322.6M. Despite the strong showing, some analysts remained neutral on the shares: "We would like to see more evidence of a sustained recovery in the communications market segment before we become more positive on the stock," Morgan Stanley analyst Louis P. Gerhardy wrote in a research note. Likewise, Citigroup analyst Glen Yeung told clients that revenue growth in enterprise networking hasn't been enough to offset weakness in the rest of the communications business. Yeung did, however, raise his price target to $28 from $23. Altera also said it was negotiating for a long-term credit facility of up to $750M, of which it plans to use $500M to buy back stock. Shares gained 0.8% in AH trading Monday.

Sources: Press release, Altera Q2 2007 earnings call trancript, TheStreet.com, Reuters, AP
Commentary: Reading Between the Lines To Spot the Next Cisco • Bear Stearns Cautions Investors On Xilinx, Altera; Sees Weakening PLD Market • The Long Case for Semi Stocks
Stocks/ETFs to watch: Altera Corp. (ALTR). Competitors: Actel Corp. (ACTL), Lattice Semiconductor Corp. (LSCC), Xilinx Inc. (XLNX). ETFs: SPDR S&P Semiconductor (XSD), Semiconductor HOLDRs (SMH)

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