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Analysts find bright side to Xilinx warning

Analysts maintained their ratings on Xilinx (Nasdaq: XLNX) Tuesday even though it warned that sales would grow 5 percent to 7 percent sequentially, down from 12 percent. Wall Street said Xilinx's warning wasn't as bad as Altera's.

Shares in the maker of programmable logic devices fell 0.69 to 41. Xilinx reduced estimates for the fourth quarter late Monday, saying disappointing November bookings from large North American customers were to blame.

Rick Billy of SG Cowen maintained a "buy" rating and called the lowered guidance "not good news, but not as bad as Altera."

"This sounds very much like what we have heard already from companies such as Altera and Cypress Semiconductor (NYSE: CY)," Billy stated in a research note. "Bookings outside North America are on track. That is better than we have heard from others who have lowered guidance," he added.

Xilinx made the point that contract manufacturers account for less than 35 percent of its shipments, versus 70 percent of domestic shipments for Altera. Unlike Altera, which guided to flat quarter over quarter revenue growth, Xilinx expects to see 5 to 7 percent growth.

A.G. Edwards & Sons, Inc. analyst Christopher A. Chaney reiterated a "maintain" rating on the stock and said that $30 was an attractive price for long-term investors.

"We believe that the reason Xilinx will be able to grow over 5 percent this quarter, while Altera states that they expect no growth, is because Xilinx has a strong hold on the high-end of the programmable logic market, with the Virtex and Virtex-e products, which are beginning to ramp as a result of design wins 6-12 months ago. Altera, in contrast, does not have the product momentum with its Excalibur," said Chaney.

Analyst David Wu at ABN AMRO maintained a "buy" rating on the stock despite reducing revenue estimates for the fourth quarter and calendar year 2001. He also downwardly revised the stock's price target to $60 from $70.

"Our impression is that XLNX is experiencing an inventory correction in the channels that should continue until (the first quarter of calendar year 2001,)" Wu said in a research note. He also said that strength in the company's new product portfolio "should enable a moderate sales growth of 5 percent in (the second quarter of calendar year 2001)."

Inventory correction is a 3 month to 6 month issue, and we expect Xilinx to post a 32 percent year-to-year growth in calendar year 2001, Wu added.

UBS Warburg analyst Gregory Mischou said also maintained his rating -- a "buy" -- while lowering earnings estimates to $1.24 from $1.30 for fiscal year 2001 and to $1.59 from $1.80 for 2002. He also lowered his target price to $52 from $80.

"We believe that (Xilinx) will continue to outgrow the semiconductor industry due to continued momentum in the PLD industry and the company`s leadership position," Mischou said in his report.