Altera eyes higher sales as China telecoms grow

SAN FRANCISCO, USA: Programmable chipmaker Altera Corp forecast its sales would grow in the fourth quarter as China expands its wireless telephone infrastructure but some analysts warned that revenue could slow next year.

Altera, which along with competitor Xilinx Inc dominates the programmable logic devices market, beat third-quarter earnings estimates and said its sales in the December quarter could expand 3 to 6 percent sequentially.

"The go-forward guidance is clearly better than everyone thought ... There's a Q4 budget flush, demand for base stations in China is going to be strong through the end of the year," said Auguste Richard, an analyst at Piper Jaffray.

The company's results comes a week after heavyweight chipmaker Intel Corp boosted hopes for the beaten down technology sector when it said its sales could rise 3 percent in the final quarter of 2010 from the quarter before.

Telecom gear makers Huawei and ZTE have been big customers of Altera as they expand China's telecom infrastructure, but CLSA analyst Srini Pajjuri said demand could cool in early 2011 as its clients' main projects taper off.

"My sense is China is going to slow down a bit. ... It's going to be a combination of demand slowdown and some inventory correction," he said.

Analysts on average had expected Altera's fourth-quarter sales to dip about 3 percent, according to Thomson Reuters I/B/E/S.

Chief executive officer John Daane told analysts during a conference call that investments in wireless infrastructure in India, Japan and the United States would mean strong demand for Altera's chips over the long term.

Altera said third-quarter net income increased to $218 million, or 69 cents a share, from $57 million, or 19 cents a share, in the year-ago period. That exceeded the average analyst estimate of 65 cents a share.

Quarterly revenue was $528 million, in line with the Wall Street estimate of $526 million.

San Jose, California-based Altera's stock rose 2.3 percent in after-hours trading after it closed down 0.46 percent at $29.50.

Altera expects a gross margin of 70 percent to 71 percent in the current quarter, compared with 70 percent in the third quarter.

Over time, the company will continue to use its cash to buy back shares, raise its dividend and look at acquisitions, chief financial officer Ronald Pasek said.