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Altera Announces Third Quarter Results

SAN JOSE, Calif., Oct. 20, 2011 /PRNewswire via COMTEX/ --

Altera Corporation (NASDAQ: ALTR) today announced third quarter sales of $522.5 million, down 5 percent from the second quarter of 2011 and down 1 percent from the third quarter of 2010. Third quarter net income was $185.4 million, $0.57 per diluted share, compared with net income of $214.6 million, $0.65 per diluted share, in the second quarter of 2011 and $217.5 million, $0.69 per diluted share, in the third quarter of 2010.

Year-to-date cash flow from operating activities was $739.2 million. Altera repurchased 4.8 million shares of its common stock during the quarter at a cost of $197 million. Altera ended the quarter with $3.3 billion in cash and investments.

Altera's board of directors has declared a quarterly cash dividend of $0.08 per share payable on December 1, 2011 to stockholders of record on November 10, 2011.

"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."

Several recent accomplishments mark the company's continuing progress:

  • Altera is now shipping Stratix® V GT FPGAs, the industry's first 28-nm devices with 28-Gbps transceiver capability. This device follows the successful launch of the Stratix V GX family in early April. Building on more than a decade of internally developed transceiver technology innovations, Stratix V FPGAs enable designers of leading-edge communications and military systems to quickly bring to market solutions that support the ever-growing demand for network bandwidth. Stratix V FPGAs are the only FPGAs to use TSMC's 28HP (high performance) process. Altera combines the benefits of the 28HP process with a tailored optimized architecture, equipping the Stratix V GT FPGA with high performance and the industry's highest bandwidth, while dramatically reducing the system's power-per-bandwidth profile.
  • Altera has announced its families of ARM-based SoC FPGAs, integrating 28-nm Cyclone® V and Arria® V FPGA fabrics, a dual-core ARM® Cortex-A9 MPCore(TM) processor, peripherals, and high-bandwidth interconnect into a single chip. The Cyclone V and Arria V SoC FPGAs are based on the low-power 28LP process and like all of Altera's 28-nm FPGAs use a tailored architecture to optimize performance, power and cost. Altera's SoC FPGAs appeal to designers in a variety of industries looking for ways to have flexibility and reduce board size, power and cost, while boosting performance. Also announced was the immediate availability of the industry's first virtual target for software development on SoC FPGAs. Based on proven virtual prototyping solutions, Altera's SoC FPGA Virtual Target is a PC-based functional simulation of an Altera SoC development board. With Altera's SoC FPGA Virtual Target, engineers can jump-start their software development to maximize their productivity and get to market quicker.
  • Altera was named by Forbes magazine as one of the world's top 100 most innovative companies. The rankings, which appear on Forbes.com and in the August 8 issue of Forbes magazine, are based on an eight-year study by Harvard Business School professor and "master of disruptive innovation" Clayton M. Christensen, along with colleagues Jeff Dyer, a professor at Brigham Young University, and Hal B. Gregersen, a professor of leadership at the Institut Europeen d'Administration des Affaires (INSEAD). Altera was recognized for its culture of innovation that drives the company's success. Altera's founders pioneered the first reprogrammable logic device in 1983, giving birth to an entirely new market segment in semiconductors.
  • Altera has been selected by China Electronic News(CEN) to receive its 2011 Best FPGA Technology Award. The selection committee was comprised of government officials, industry experts, members from the CEN editorial team, and channel distributors who reviewed nominations from CEN editors and the public. In making the award, CEN noted the success of Altera's 40-nm FPGAs and the many innovations enabled by its 28-nm product portfolio, such as variable-precision DSP, 28-Gbps transceivers, partial reconfiguration, and Embedded HardCopy® Blocks.

Business Outlook for the Fourth Quarter 2011

 

Sequential Revenue

Down 7% to 11%

   

Gross Margin

70% +/- .5%

   

Research and Development

$91 to 93 million

   

SG&A

$70 to 72 million

   

Tax Rate

10% to 11%

   
     

Third Quarter Earnings Conference Call

A conference call will be held today at 1:45 p.m. Pacific Time to discuss the quarter's results and management's current business outlook. A telephonic replay of the call may be accessed later in the day by calling (719) 457-0820 and referencing confirmation code 258712. The telephonic replay will be available for two weeks following the live call.

Fourth Quarter Update

Altera's fourth quarter business update will be issued in a press release available after the market close on December 8, 2011.

Forward-Looking Statements

Statements in this press release that are not historical are "forward-looking statements" as the term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally written in the future tense and/or preceded by words such as "will," "expects," "anticipates," or other words that imply or predict a future state. Forward-looking statements include any projection of revenue, gross margin, expense or other financial items discussed in the Business Outlook section in this press release. Investors are cautioned that all forward-looking statements in this release involve risks and uncertainty that can cause actual results to differ from those currently anticipated, due to a number of factors, including without limitation, current global economic conditions, customer business environment, customer inventory levels, vertical market mix, market acceptance of the company's products, product introduction schedules, the rate of growth of the company's new products including Cyclone® IV, Arria® II, Stratix® IV, and Stratix V FPGAs, MAX® V CPLDs and HardCopy® IV device families, changes in the mix of our business between prototyping and production-based demand, as well as changes in economic conditions and other risk factors discussed in documents filed by the company with the Securities and Exchange Commission (SEC) from time to time. Copies of Altera's SEC filings are posted on the company's website and are available from the company without charge. Forward-looking statements are made as of the date of this release, and, except as required by law, the company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

About Altera

Altera programmable solutions enable system and semiconductor companies to rapidly and cost-effectively innovate, differentiate and win in their markets. Follow Altera via Facebook, RSS and Twitter.

 

INVESTOR CONTACT

 

MEDIA CONTACT

 

Scott Wylie - Vice President

 

Yoko Okamura - Senior Manager

 

Investor Relations

 

Public Relations

 

(408) 544-6996

 

(408) 544-6397

 

 

 

 

 
     

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 
   

Three Months Ended

 

Nine Months Ended

 

(In thousands, except per share amounts)

 

September 30, 2011

 

July 1, 2011

 

October 1, 2010

 

September 30, 2011

 

October 1, 2010

 
                       

Net sales

 

$

522,474

   

$

548,383

   

$

527,453

   

$

1,606,671

   

$

1,399,048

   

Cost of sales

 

166,938

   

159,716

   

157,899

   

473,565

   

405,646

   

Gross margin

 

355,536

   

388,667

   

369,554

   

1,133,106

   

993,402

   

Operating expense

                     

Research and development expense

 

80,771

   

80,260

   

67,896

   

235,438

   

197,861

   

Selling, general, and administrative expense

 

69,345

   

70,182

   

63,473

   

208,550

   

190,421

   

Total operating expense

 

150,116

   

150,442

   

131,369

   

443,988

   

388,282

   

Operating margin (1)

 

205,420

   

238,225

   

238,185

   

689,118

   

605,120

   

Compensation (benefit) expense -- deferred compensation plan

 

(6,642)

   

54

   

4,699

   

(4,926)

   

3,285

   

Loss (gain) on deferred compensation plan securities

 

6,642

   

(54)

   

(4,699)

   

4,926

   

(3,285)

   

Interest income and other

 

(663)

   

(957)

   

(1,092)

   

(2,505)

   

(2,394)

   

Interest expense

 

806

   

870

   

1,098

   

2,717

   

3,492

   

Income before income taxes

 

205,277

   

238,312

   

238,179

   

688,906

   

604,022

   

Income tax expense

 

19,873

   

23,685

   

20,688

   

64,806

   

52,751

   

Net income

 

$

185,404

   

$

214,627

   

$

217,491

   

$

624,100

   

$

551,271

   
                       

Net income per share:

                     

Basic

 

$

0.58

   

$

0.66

   

$

0.70

   

$

1.94

   

$

1.81

   

Diluted

 

$

0.57

   

$

0.65

   

$

0.69

   

$

1.90

   

$

1.78

   
                       

Shares used in computing per share amounts:

                     

Basic

 

321,745

   

323,271

   

309,766

   

322,012

   

304,267

   

Diluted

 

327,044

   

329,904

   

317,069

   

328,264

   

310,367

   
                       

Cash dividends per common share

 

$

0.08

   

$

0.06

   

$

0.06

   

$

0.20

   

$

0.16

   
                       

Tax rate

 

9.7%

   

9.9%

   

8.7%

   

9.4%

   

8.7%

   

% of Net sales:

                     

Gross margin

 

68.0%

   

70.9%

   

70.1%

   

70.5%

   

71.0%

   

Research and development

 

15.5%

   

14.6%

   

12.9%

   

14.7%

   

14.1%

   

Selling, general, and administrative

 

13.3%

   

12.8%

   

12.0%

   

13.0%

   

13.6%

   

Operating margin(1)

 

39.3%

   

43.4%

   

45.2%

   

42.9%

   

43.3%

   

Net income

 

35.5%

   

39.1%

   

41.2%

   

38.8%

   

39.4%

   

Notes:

                     

(1)We define operating margin as gross margin less research and development and selling, general and administrative expenses, as presented above. This presentation differs from income from operations as defined by U.S. Generally Accepted Accounting Principles ("GAAP"), as it excludes the effect of compensation associated with the deferred compensation plan obligations. Since the effect of compensation associated with our deferred compensation plan obligations is offset by losses/(gains) from related securities, we believe this presentation provides a more meaningful representation of our ongoing operating performance. A reconciliation of operating margin to income from operations follows:

 
                                         
   

Three Months Ended

 

Nine Months Ended

 

(In thousands, except per share amounts)

 

September 30, 2011

 

July 1, 2011

 

October 1, 2010

 

September 30, 2011

 

October 1, 2010

 

Operating margin (non-GAAP)

 

$

205,420

   

$

238,225

   

$

238,185

   

$

689,118

   

$

605,120

   

Compensation (benefit) expense -- deferred compensation plan

 

(6,642)

   

54

   

4,699

   

(4,926)

   

3,285

   

Income from operations (GAAP)

 

$

212,062

   

$

238,171

   

$

233,486

   

$

694,044

   

$

601,835

   
   
                                         

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In thousands, except par value amount)

 

September 30, 2011

 

December 31, 2010

 
           

Assets

         

Current assets:

         

Cash and cash equivalents

 

$

3,177,314

   

$

2,765,196

   

Short-term investments

 

61,399

   

--

   

Total cash, cash equivalents, and short-term investments

 

3,238,713

   

2,765,196

   

Accounts receivable, net

 

386,842

   

363,614

   

Inventories

 

134,028

   

146,524

   

Deferred income taxes -- current

 

80,478

   

66,839

   

Deferred compensation plan -- marketable securities

 

50,809

   

54,419

   

Deferred compensation plan -- restricted cash equivalents

 

18,157

   

19,817

   

Other current assets

 

60,151

   

114,601

   

Total current assets

 

3,969,178

   

3,531,010

   

Property and equipment, net

 

171,100

   

164,155

   

Long-term investments

 

66,780

   

--

   

Deferred income taxes -- non-current

 

29,781

   

37,319

   

Other assets, net

 

34,971

   

27,353

   

Total assets

 

$

4,271,810

   

$

3,759,837

   
           

Liabilities and stockholders' equity

         

Current liabilities:

         

Accounts payable

 

$

54,367

   

$

86,061

   

Accrued liabilities

 

23,053

   

23,278

   

Accrued compensation and related liabilities

 

79,617

   

83,773

   

Deferred compensation plan obligations

 

68,966

   

74,236

   

Deferred income and allowances on sales to distributors

 

439,826

   

428,711

   

Income taxes payable

 

1,592

   

428

   

Credit facility

 

500,000

   

--

   

Total current liabilities

 

1,167,421

   

696,487

   

Income taxes payable -- non-current

 

260,790

   

231,833

   

Credit facility

 

--

   

500,000

   

Other non-current liabilities

 

8,831

   

7,865

   

Total liabilities

 

1,437,042

   

1,436,185

   

Stockholders' equity:

         

Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 320,855 shares at September 30, 2011 and 319,494 shares at December 31, 2010

 

321

   

319

   

Capital in excess of par value

 

1,011,865

   

908,989

   

Accumulated other comprehensive loss

 

(190)

   

--

   

Retained earnings

 

1,822,772

   

1,414,344

   

Total stockholders' equity

 

2,834,768

   

2,323,652

   

Total liabilities and stockholders' equity

 

$

4,271,810

   

$

3,759,837

   
   
                 

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

Continued

 

(In thousands, except par value amount)

 

September 30,2011

 

December 31,2010

 
           

Key Ratios & Information

Current Ratio

 

3:1

   

5:1

   

Liabilities/Equity

 

1:2

   

1:2

   

Quarterly Operating Cash Flows

 

$

282,873

   

$

210,151

   

TTM Return on Equity

 

34%

   

48%

   

Quarterly Depreciation Expense

 

$

7,428

   

$

6,815

   

Quarterly Capital Expenditures

 

$

13,382

   

$

6,117

   

Inventory MSOH (1): Altera

 

2.4

   

2.7

   

Inventory MSOH (1): Distribution

 

0.6

   

0.8

   

Cash Conversion Cycle

 

78

   

85

   

Note (1): MSOH: Months Supply On Hand

         
   
                 

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 
 

Nine Months Ended

 
 

September 30, 2011

 

October 1, 2010

 
         

Cash Flows from Operating Activities:

       

Net income

$

624,100

   

$

551,271

   

Adjustments to reconcile net income to net cash provided by operating activities:

       

Depreciation and amortization

23,443

   

20,276

   

Stock-based compensation

59,983

   

44,898

   

Deferred income tax benefit

(9,549)

   

(16,493)

   

Tax effect of employee stock plans

26,077

   

14,602

   

Excess tax benefit from employee stock plans

(22,959)

   

(12,879)

   

Changes in assets and liabilities:

       

Accounts receivable, net

(23,228)

   

(128,668)

   

Inventories

12,496

   

(38,448)

   

Other assets

47,986

   

(43,946)

   

Accounts payable and other liabilities

(40,004)

   

112,788

   

Deferred income and allowances on sales to distributors

11,115

   

103,665

   

Income taxes payable

30,122

   

42,358

   

Deferred compensation plan obligations

(345)

   

(2,880)

   

Net cash provided by operating activities

739,237

   

646,544

   

Cash Flows from Investing Activities:

       

Purchases of property and equipment

(23,178)

   

(6,325)

   

Sales of deferred compensation plan securities, net

345

   

2,880

   

Purchases of available-for-sale securities

(130,146)

   

--

   

Proceeds from sale and maturity of available-for-sale securities

1,750

   

--

   

Purchases of intangible assets

--

   

(1,500)

   

Net cash used in investing activities

(151,229)

   

(4,945)

   

Cash Flows from Financing Activities:

       

Proceeds from issuance of common stock through various stock plans

93,619

   

284,776

   

Shares withheld for employee taxes

(31,122)

   

(19,880)

   

Payment of dividends to stockholders

(64,328)

   

(48,764)

   

Repurchases of common stock

(197,018)

   

--

   

Excess tax benefit from stock-based compensation

22,959

   

12,879

   

Principal payments on capital lease obligations

--

   

(2,866)

   

Net cash (used in) provided by financing activities

(175,890)

   

226,145

   

Net increase in cash and cash equivalents

412,118

   

867,744

   

Cash and cash equivalents at beginning of period

2,765,196

   

1,546,672

   

Cash and cash equivalents at end of period

$

3,177,314

   

$

2,414,416

   
   
               

ALTERA CORPORATION

NET SALES SUMMARY

(Unaudited)

 
 

Three Months Ended

 

Quarterly Growth Rate

 
 

September 30, 2011

 

July 1, 2011

 

October 1, 2010

 

Sequential Change

 

Year-

Over-Year

Change

 

Geography

                   

Americas

16%

   

19%

   

20%

   

(16)%

   

(19)%

   

Asia Pacific

44%

   

40%

   

44%

   

3%

   

(1)%

   

EMEA

25%

   

27%

   

21%

   

(10)%

   

17%

   

Japan

15%

   

14%

   

15%

   

(3)%

   

(1)%

   

Net Sales

100%

   

100%

   

100%

   

(5)%

   

(1)%

   
                               

Product Category

                             

New

27%

   

18%

   

13%

   

43%

   

112%

   

Mainstream

32%

   

36%

   

31%

   

(15)%

   

3%

   

Mature and Other

41%

   

46%

   

56%

   

(16)%

   

(29)%

   

Net Sales

100%

   

100%

   

100%

   

(5)%

   

(1)%

   
                               

Vertical Market

                             

Telecom & Wireless

42%

   

46%

   

45%

   

(13)%

   

(7)%

   

Industrial Automation, Military & Automotive

22%

   

22%

   

22%

   

(7)%

   

(2)%

   

Networking, Computer & Storage

20%

   

15%

   

13%

   

31%

   

50%

   

Other

16%

   

17%

   

20%

   

(11)%

   

(21)%

   

Net Sales

100%

   

100%

   

100%

   

(5)%

   

(1)%

   
                               

FPGAs and CPLDs

                             

FPGA

82%

   

80%

   

82%

   

(3)%

   

(1)%

   

CPLD

9%

   

10%

   

11%

   

(16)%

   

(20)%

   

Other Products

9%

   

10%

   

7%

   

(10)%

   

35%

   

Net Sales

100%

   

100%

   

100%

   

(5)%

   

(1)%

   
   
                             

Product Category Description

 

  • New Products include the Stratix® V, Stratix IV (including E, GX and GT), Arria® II (including GX and GZ), Cyclone® IV (including E and GX), MAX® V, and HardCopy® IV devices.
  • Mainstream Products include the Stratix III, Cyclone III, MAX II, and HardCopy III devices.
  • Mature and Other Products include the Stratix II (and GX), Stratix (and GX), Arria GX, Cyclone II, Cyclone, Classic(TM), MAX 3000A, MAX 7000, MAX 7000A, MAX 7000B, MAX 7000S, MAX 9000, HardCopy II, HardCopy, FLEX® series, APEX(TM) series, Mercury(TM), and Excalibur(TM) devices, configuration and other devices, intellectual property cores, and software and other tools.

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