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Earnings roundup: Chip industry continues comeback

Xilinx Inc. (Nasdaq: XLNX) rode a chip industry rebound in the first quarter to post better than expected earnings.

In fiscal first quarter results released after market close Tuesday, the maker of chips used in cell phones and data networking equipment said net income rose to $51.6 million, or 31 cents a diluted share. First Call's survey of analysts predicted a profit of 28 cents.

First quarter sales increased to $211.4 million, a 41 percent gain from $149.5 million in the year earlier period, when Xilinx lost $635,000. Xilinx and other providers of networking and communications chips are reaping profits because of stiff demand.

The semiconductor industry is also steadily coming out of its worst slump ever and chip giants such as Intel Corp. are forecasting a strong second half of the year.

Xilinx makes so-called programmable logic devices and field programmable gate-array semiconductors, both of which can be reprogrammed by the customer to perform different functions.

Others reporting quarterly results:

  • TriQuint Semiconductor Inc.
  • (Nasdaq: TQNT) Another communications chip vendor that topped analyst estimates.

    The Hillsboro, Ore.-based company posted second quarter net income of $4.3 million, or 26 cents a share. Analyst consensus predicted a per share profit of 23 cents for the quarter ended June 30.

    Second quarter revenue increased to $38.1 million, up 37 percent year-over-year from $27.9 million. During the quarter, TriQuint landed 100 major design wins. The company defines a "major" win as one expected to generate at least $100,000 annually if and when it reaches full production.

  • Teradyne Inc.
  • (NYSE: TER) The maker of semiconductor testing equipment saw higher earnings than Wall Street forecast.

    Providing the latest evidence of a rebound for the semiconductor industry, Teradyne saw second quarter net income of $35.8 million, or 40 cents a share. Analyst consensus was looking for a per share profit of 38 cents.

    Although second quarter revenues were down slightly year-over-year, to $401 million from $406.2 million, the 1.3 percent decline was a vast improvement over the 20 percent revenue drop in the first quarter. Tuesday's report marked the second straight quarter of higher earnings and sales.

    More significant for the future, Teradyne received new orders totaling $571 million, a vast 128.6 percent improvement over $249.8 million a year ago.

  • Cadence Design Systems
  • (NYSE: CDN) The maker of semiconductor design software didn't live down to expectations; instead, it fell even further than analysts predicted.

    And the company says the bottom line won't improve for at least a year.

    A 16 percent year-over-year drop in second quarter revenue, to $264 million, resulted in net income of 8 cents per share, excluding one-time events and goodwill amortization. Consensus analyst estimates called for per share earnings of 21 cents.

    Product revenue dropped 37 percent sequentially and 34 percent year-over-year. Services revenue rose 12 percent from the comparable period a year earlier.

    To establish more stable and more predictable revenue, and to help customers move to new technology faster, Cadence has started a subscription-based model for product sales. Since the subscriptions cover technology not yet released, accounting rules require Cadence to record the revenue over the contract's lifespan -- typically two years -- rather than recognizing it all at once.

    Ultimately, Cadence expects 30 percent of product bookings to be under a subscription basis. Because of the transition to the new sales model, Cadence expects no year-over-year revenue growth until the second quarter of 2000. Third quarter sales will also be down sequentially, the company warned.

  • CDW Computer Centers Inc.
  • (Nasdaq: CDWC) Notebook computers, memory chips and add-on boards and networking accessories helped the computer products reseller easily hurdle analysts estimates in the second quarter.

    Net income of $22.3 million, or 51 cents per share, represented a 42 percent gain year-over-year. First Call's survey of seven analysts predicted a per share profit of 46 cents.

    Revenue increased to $597.5 million, a gain of 46 percent from $408.9 million in the second quarter of 1998. A beefed up sales force, improved online presence, aggressive branding campaign and ability to do custom configurations helped drive sales higher, said Michael P. Krasny, chairman and CEO. "Our capabilities match the services required from our commercial customer base, where demand remained strong throughout the second quarter, clearly enabling us to gain market share."

    Add-on boards/memory, notebooks, networking and communication and software were the fastest-growing product lines, each with growth rates exceeding 40 percent. Notebook computers, which remained the largest product category at 20 percent of total revenue, increased 48 percent year-over-year. Desktop computers, including servers, increased more than 36 percent.

    Average selling prices rose 5.5 percent for desktop computers as servers made a higher percentage of sales for CDW, which gets most of its revenue from business customers, increased its mix of server sales. Notebook prices fell 2.4 percent, said Gregory Zeman, CDW's president. Sales rose an average of 33 percent for commercial accounts, he said.

    Online sales grew 169 percent year-over-year, and 28 percent sequentially. CDW now has more than 18,000 customized websites for commercial customers, Zeman said.

    Gross margin was basically flat at 12.5 percent compared to 12.6 percent a year earlier. Inventory turns increased to 26 times for the quarter, up from 24 in the year ago period.>