Monday, April 21, 2008

Altera Q1 Shows PLD Sector Strength

Altera (ALTR) reported Q1 results on April 16th, at which time I was recovering from my recent Microsoft project. I listened to the analyst conference recording today. If you like you can read my summary of the conference.

Revenues were up 4% over Q4 and 10% over Q1 2007. While that is not hockey stick growth, it is respectable when many semiconductor companies are reporting numbers that are down to flat from a year ago. What is Altera's competitive advantage?

Altera make PLDs, programmable logic devices. Essentially a PLD is a piece of silicon with a bunch of logic gates arrayed on it. Need some new cell phone logic? You use software to design what you want, then program the PLD. Stick the programmed chip on the board with the other chips and you are ready to run, or at least debug. So you can use this process for prototypes or small runs. For larger, stable runs usually manufacturers go with the well known process of making an IC that has the logic in the physical design, an application-specific IC or ASIC.

There are common sorts of PLDs, and Altera makes both. FPGA are fully programmable gate arrays. CPLDs are Complex PLDs. Increasingly other functions besides logic are available on these chips, notably analog communications functions.

According to Altera, the PLD market is growing faster than the chip market in general as ASICs are increasingly replaced by programmable devices.

Rival Xilinx will be reporting its Q1 on April 23. My summary of that conference will be here, in case you want to bookmark it. Of course several other companies are in the PLD business as well. Altera is moving to a 40nm process this year, and yes, that is a smaller transistor size than Intel is using at present. Xilinx will doubtless tell us why theirs is the product of choice when it reports.

Altera is looking at continuing growth based on customer feedback, a book-to-bill ratio over 1, and a strong backlog of orders to fill.

I don't own the stock and am not about to run out and buy it. Strangely, this is because Altera is too well managed. They have generated a lot of cash and have been buying back their stock throughout the current liquidity squeeze. I would not call the stock overpriced, and it is relatively safe for a technology stock. But there are a number of technology companies that are growing as fast or faster that have lower price-to-earnings ratios at this time. If Altera stock got caught in a market downdraft, however, I might add it to my buy list.

More data:
my main Altera page

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