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LTE Traction and Intel Partnership Can Help Altera Deliver Long-Term Growth

August 08, 2014 | About:
amal.singh70

amal.singh70

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Altera (ALTR) posted decent results. The programmable chip maker came out with good numbers, topping analysts' estimates on earnings and revenue. Further, in line with good results, Altera is expecting better results in the future.

Business gaining momentum

Altera’s chip business is doing well. As a result, the company’s revenue rose by a good 12% on a year over year basis to $461 million. The EPS came in at $0.37 per share, beating analysts' estimates. The analysts were modeling $438 million and $0.32 per share for top line and earnings. The good results by the company show that it is penetrating the chip industry by tapping profitable opportunities. Further, the good results impressed investors, and as a result, shares of Altera were up 4%.

The semiconductor industry is moving at a good pace. It has immense opportunities for chipmakers. Altera is focused on attaining operational efficiencies and is focused on improving its services to gain more customer attention. Further, Altera is expecting the telecom and wireless categories to grow. On the other hand, it is also expecting segments such as automobile, industrial and military to suffer weakness.

Some concerns and beyond

Altera is expecting choppy results from China as deployments in China can be large and fast, which may lead the results to fluctuate. But the chipmaker is confident as it is on the front foot with the LTE rollout in China, which can be a major growth driver for the company. On the international front, Altera has started seeing LTE gaining traction in Europe. The company expects that it will start benefiting in the latter half of the year.

In developing countries such as India, Altera is seeing the 3G business picking up. Seeing these improvements in its business, Altera is expecting its wireless business to grow.

On the technological front, Altera’s next generation product portfolio is strong and is gearing up well for further benefits. Some of its outstanding products such as Quatrus II software and Arria 10 with 20 nanometer chip are doing well. Moving ahead, Altera is also focusing on low-end segment. For that, the company is well in line with introduction of its low-end MAX 10 product, whose introduction in the market isn’t yet scheduled.

Intel partnership

Altera’s biggest strength is in working with Intel. Altera is working with Intel to combine separate components like processors, memory and programmable chips into customized devices in a technique aimed at reducing manufacturing costs and improving performance. Further, the news that Intel has widened the agreement to manufacture chips for Altera is important and can prove to be a growth driver for the company.

Moreover, Altera is also looking to improve its profit margin by being cost effective. For attaining this, Altera is planning to slow its expense growth in the future allowing the earnings to grow faster than its top line. The chipmaker is confident of its outperformance in the future and as a result, it has also posted a strong outlook.

Conclusion

Altera has impressive prospects. The company also looks reasonable with a trailing P/E of 24.24. The forward P/E of the company is pretty decent at 18.22. As the LTE platform is in infancy, Altera can prove to be a good investment in the future. Hence, investors should definitely consider Altera for their portfolios.


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