Xilinx, Analysts, Products, Sales Analysts high on Xilinx amid margin concern

SAN FRANCISCO—Analysts remained mostly bullish on programmable logic vendor Xilinx Inc. following the company's earnings report Wednesday (July 20) despite some concerns about the company's declining gross margins.

"We came away from the earnings call more positive than the numerical results and guidance reflect, as we believe gross margins are on track to rapidly recover and there is ample runway on improving gross margins and op-ex by optimizing business practices (i.e. tiered volume pricing) in upcoming quarters and years," wrote Ian Ing, an analyst with Gleacher and Co., in a report circulated Thursday.

Xilinx (San Jose, Calif.) reported sales for the quarter of $615.5 million, up 5 percent from the previous quarter and up 3 percent from the year-ago quarter. The company reported a net income for the quarter of $154.4 million, or 56 cents per diluted share, down 4 percent from the previous quarter and down 3 percent compared to the year ago quarter.

Consensus analysts' expectations for the quarter called for Xilinx to report sales of about $599 million, according to Yahoo Finance.

Xilinx guided for sales of between $609.3 million and $634 million for the current quarter, a range of down 1 percent to up 3 percent sequentially. Gross margin is expected to decline to 63 percent in the current quarter, Xilinx said. Analysts were expecting Xilinx to guide for sales of about $604 million for the current quarter, according to Yahoo Finance.

Xilinx' gross margin in the quarter slipped to 63.7 percent from 65.3 percent in the previous quarter due to product mix. Jon Olson, Xilinx chief financial officer, said the gross margin was impacted by stronger than expected growth from the company's Virtex-6 and Spartan-6 families concurrent with declines from Xilinx' base and mainstream product families.

Moshe Gavrielov, Xilinx president and CEO, said in the earnings call that the company's 5 percent sequential revenue increase was driven by double-digit growth in seven of the company's end market segments. "This very broad-based end market strength resulted in revenue growth that exceeded the high end of our revenue guidance and speaks to the continued displacement of ASICs and ASSPs by PLDs," he said.Xilinx, Analysts, Products, Sales Analysts high on Xilinx amid margin concern