Now that I have a larger audience through Seeking Alpha, I am going to cover a wider variety of technology and biotechnology stocks. I am starting with a company that I covered in the past, Altera Corporation (ALTR)
In my introductory article, Altera Worth Watching for Upside Surprises, I take an essentially neutral stance. In future articles I'll be digging more deeply into the Altera story and comparing it with rival Xilinx, as well as other semiconductor companies that make programmable logic devices (PLDs).
AMD reports later today. I will be in transit, but hopefully can get a report out tomorrow.
Showing posts with label PLD. Show all posts
Showing posts with label PLD. Show all posts
Thursday, July 18, 2013
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:
www.altera.com
my main Altera page
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:
www.altera.com
my main Altera page
Sunday, November 18, 2007
Altera (ALTR) Valuation
Altera (ALTR) makes programmable logic devices (PLDs). Before doing a valuation of this company's stock price, I need to remind myself about numbers. Numbers sometimes hypnotize tech guys and gals. Stock prices are about the future, so unless you are doing quick, in-and-out momentum trading or some similar strategy, you need to be careful with numbers. The future of a technology company, and hence its stock price, is tied to how broadly its technology will be adapted in the future, and how well it can shift to new technologies when they become the future.
If you don't know about PLDs and their variations known as CPLDs and FPGAs, check out my Altera, FPGAs and FPGAs blog entry from March.
I tend to go with the future of PLDs is rosy theory, but keep in mind that does not mean every PLD maker will be successful. With that caveat in mind, let's look at recent Altera numbers and trends.
Altera's last reported numbers were for Q3 2007. Revenues were $$315.8 million, down 1% from $319.7 million in Q2 and down 7% from year-earlier $341.2 million.
That is pretty grim, and net income was $69.0 million, down 14% sequentially from $80.5 million and down 21% from $87.4 million year-earlier. Not good, but here's what is good: even in a slump the company has enough profit margins in its products to earn investors substantial net income.
Because Altera is not a rapidly growing company, you can buy its stock at a pretty fair Price-to-earnings ration (PE). It closed Friday, November 17, 2007 at $18.90 per share, giving the company a market capitalization of $6.5 billion. Using Q3 net income, annualizing by multiplying by 4 we get $276 million. Dividing that into market cap we get a current PE of 23.6. Inverting that we get a rate of return of 4.2%.
There are worse things than a rate of return of 4.2%, but it is not exactly an encouraging number. Nor does Altera management see a quick turn around. They expect Q4 2007 revenues to be sequentially flat to down 4%.
Maybe this is a bad year because of macroeconomic uncertainty, but there is going to be macroeconomic uncertainty in 2008 too. I suspect inventories are lean at this point, so a pick up in demand could cause customers to up their inventories as well. I think PLDs have a good future because they can cost less than ASICs for smaller production runs, which means the when a technology needs to be updated frequently PLDs are the way to go.
Still, at this stock price, for my portfolio needs, Altera is in the upper end of the fairly valued range. It is a safe, well run, profitable performer, but my local Credit Union will give me more return on my money with much less risk.
But I'll keep an eye on the stock. If it goes below its 52-week low of $18.47, based just on a general stock-market drop rather than on any negative Altera news, I could see picking some up. These are some real smart people at Altera trying to figure out how to sell some new designs they are introducing.
I have never owned Altera or a direct competitor, but I own other makers of semiconductor chips.
More data:
My Altera page (with links to my summaries of Altera analyst conferences)
www.altera.com
If you don't know about PLDs and their variations known as CPLDs and FPGAs, check out my Altera, FPGAs and FPGAs blog entry from March.
I tend to go with the future of PLDs is rosy theory, but keep in mind that does not mean every PLD maker will be successful. With that caveat in mind, let's look at recent Altera numbers and trends.
Altera's last reported numbers were for Q3 2007. Revenues were $$315.8 million, down 1% from $319.7 million in Q2 and down 7% from year-earlier $341.2 million.
That is pretty grim, and net income was $69.0 million, down 14% sequentially from $80.5 million and down 21% from $87.4 million year-earlier. Not good, but here's what is good: even in a slump the company has enough profit margins in its products to earn investors substantial net income.
Because Altera is not a rapidly growing company, you can buy its stock at a pretty fair Price-to-earnings ration (PE). It closed Friday, November 17, 2007 at $18.90 per share, giving the company a market capitalization of $6.5 billion. Using Q3 net income, annualizing by multiplying by 4 we get $276 million. Dividing that into market cap we get a current PE of 23.6. Inverting that we get a rate of return of 4.2%.
There are worse things than a rate of return of 4.2%, but it is not exactly an encouraging number. Nor does Altera management see a quick turn around. They expect Q4 2007 revenues to be sequentially flat to down 4%.
Maybe this is a bad year because of macroeconomic uncertainty, but there is going to be macroeconomic uncertainty in 2008 too. I suspect inventories are lean at this point, so a pick up in demand could cause customers to up their inventories as well. I think PLDs have a good future because they can cost less than ASICs for smaller production runs, which means the when a technology needs to be updated frequently PLDs are the way to go.
Still, at this stock price, for my portfolio needs, Altera is in the upper end of the fairly valued range. It is a safe, well run, profitable performer, but my local Credit Union will give me more return on my money with much less risk.
But I'll keep an eye on the stock. If it goes below its 52-week low of $18.47, based just on a general stock-market drop rather than on any negative Altera news, I could see picking some up. These are some real smart people at Altera trying to figure out how to sell some new designs they are introducing.
I have never owned Altera or a direct competitor, but I own other makers of semiconductor chips.
More data:
My Altera page (with links to my summaries of Altera analyst conferences)
www.altera.com
Saturday, March 10, 2007
Altera (ALTR), FPGAs and CPLDs
At its November 6, 2006 analyst conference Altera reported revenues of $341.2 million for its 3rd quarter ending September 30th. It predicted 4th quarter revenues would decline 2 to 5%. Then when it reported Q4 revenues at $317.4 million at the February 13, 2007 conference, they were down a whopping 7%. A further decline of up to 4% in revenues was given as guidance for the first quarter of 2007. Should we panick? Is Altera sliding into oblivion? Is this 2001 all over again?
Altera makes semiconductor chips and specializes in FPGAs (Fully Programmable Gate Arrays) and CPLDs (Complex Programmable Logic Devices). All these devices can be contrasted to ASICs, which are Application Specific Integrated Circuit. Supose you have an application, perhaps processing some information inside a cell phone or a hard disk drive. You decide what the semiconductor chips have to do (what their logic structure is) in order to achieve your goals. With an ASIC you then design the layout of the logic that will be in silicon. To create the ASIC chips you go through the standard manufacturing process of using masks, doping, and etching to create batches of chips incorporating your design. FPGAs and CPLDs approach the same problem by giving engineers sets of general solutions that are arrays of possible logic states. You program the FPGA to have the same logic that you would build into an ASIC. So the end products should function identically. Why not use all FPGAs, or all ASICs? There are cost advantages to ASICs once a design is nailed down and if production is on a large scale. But when an engineer sits down to design an ASIC, she could just reach into her parts box, pull out an FPGA, and program it instead. So FPGAs go from idea to finished product much faster. If you want to fix an error, or do an upgrade, often all you have to do is reprogram the FPGA. With an ASIC you have to redesign the circuits, make new masks, etc. Speed and flexibility are what FPGAs are about, but they are also great for prototypes and specialty products with low production runs.
Because of this Altera's competitors are not just other FPGA and CPLD manufacturers; they are ASIC manufacturers as well.
While prices of all stocks fluctuate, there is no way a company like Altera, in the price range it has been in lately (52 week high $22.32, 52 week low $15.54), can be compared to the revenueless Internet stocks of yesteryear. In fact even in the relatively lousy 4th quarter Altera had net income of $99 million, up 43% from its Q4 of 2005. It is in a competitive business, but not that many companies are competing in programmable silicon, so profit margins are healthy.
Altera constantly invests in the future: its R&D runs about $60 to $65 million per quarter. Part of the recent revenue decline is due to customers reducing inventory, getting into cautious positions for 2007 sales. 39% of revenue was in sales to the communications industry, which continues to deploy not just new models of cell phones, but whole new types of products like WiMax and 3G phones and their attendant base stations.
Who competes head-to-head with Altera? Actel, Atmel, Lattice Semiconductor, NEC, Quicklogic, and Xilinx. Actel had $48.2 million in Q4 2006 revenues and has FPGAs as its principal products. Atmel primarily makes microcontrollers, though it does have several FPGA lines; it has been struggling the last few years. Lattice Semiconductor is focused on FPGAs and had revenues of $61.8 million in Q4 2006. NEC is a huge company which derives only a small amount of revenue from FPGAs. Quicklogic’s web site is worth a look: they openly and cleverly challenge Altera and Xilinx on their home page. Their Q4 revenue was $7.7 million, plunging 25% year-over-year. And then there is Xilinx, the main competition. You can find out more about XLNX in my analyst conference summary for this company, which claimed 70% of the global FPGA market in 2006.
The only real short-term threat to Altera’s profitability is a global recession. In the long run their competitors are a threat, but Altera also has the potential to eat into Xilinx's market share. Overall PLD (programmable logic device) usage is certain to grow.
Altera makes semiconductor chips and specializes in FPGAs (Fully Programmable Gate Arrays) and CPLDs (Complex Programmable Logic Devices). All these devices can be contrasted to ASICs, which are Application Specific Integrated Circuit. Supose you have an application, perhaps processing some information inside a cell phone or a hard disk drive. You decide what the semiconductor chips have to do (what their logic structure is) in order to achieve your goals. With an ASIC you then design the layout of the logic that will be in silicon. To create the ASIC chips you go through the standard manufacturing process of using masks, doping, and etching to create batches of chips incorporating your design. FPGAs and CPLDs approach the same problem by giving engineers sets of general solutions that are arrays of possible logic states. You program the FPGA to have the same logic that you would build into an ASIC. So the end products should function identically. Why not use all FPGAs, or all ASICs? There are cost advantages to ASICs once a design is nailed down and if production is on a large scale. But when an engineer sits down to design an ASIC, she could just reach into her parts box, pull out an FPGA, and program it instead. So FPGAs go from idea to finished product much faster. If you want to fix an error, or do an upgrade, often all you have to do is reprogram the FPGA. With an ASIC you have to redesign the circuits, make new masks, etc. Speed and flexibility are what FPGAs are about, but they are also great for prototypes and specialty products with low production runs.
Because of this Altera's competitors are not just other FPGA and CPLD manufacturers; they are ASIC manufacturers as well.
While prices of all stocks fluctuate, there is no way a company like Altera, in the price range it has been in lately (52 week high $22.32, 52 week low $15.54), can be compared to the revenueless Internet stocks of yesteryear. In fact even in the relatively lousy 4th quarter Altera had net income of $99 million, up 43% from its Q4 of 2005. It is in a competitive business, but not that many companies are competing in programmable silicon, so profit margins are healthy.
Altera constantly invests in the future: its R&D runs about $60 to $65 million per quarter. Part of the recent revenue decline is due to customers reducing inventory, getting into cautious positions for 2007 sales. 39% of revenue was in sales to the communications industry, which continues to deploy not just new models of cell phones, but whole new types of products like WiMax and 3G phones and their attendant base stations.
Who competes head-to-head with Altera? Actel, Atmel, Lattice Semiconductor, NEC, Quicklogic, and Xilinx. Actel had $48.2 million in Q4 2006 revenues and has FPGAs as its principal products. Atmel primarily makes microcontrollers, though it does have several FPGA lines; it has been struggling the last few years. Lattice Semiconductor is focused on FPGAs and had revenues of $61.8 million in Q4 2006. NEC is a huge company which derives only a small amount of revenue from FPGAs. Quicklogic’s web site is worth a look: they openly and cleverly challenge Altera and Xilinx on their home page. Their Q4 revenue was $7.7 million, plunging 25% year-over-year. And then there is Xilinx, the main competition. You can find out more about XLNX in my analyst conference summary for this company, which claimed 70% of the global FPGA market in 2006.
The only real short-term threat to Altera’s profitability is a global recession. In the long run their competitors are a threat, but Altera also has the potential to eat into Xilinx's market share. Overall PLD (programmable logic device) usage is certain to grow.
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