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Tailwind From China Propels Growth for This Chipmaker

Infrastructure buildouts mean higher demand for Altera's programmable logic devices.

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 Altera (ALTR) reported strong first-quarter results, thanks to higher demand for programmable logic devices from the 4G LTE wireless infrastructure buildout in China. We are maintaining our $41 fair value estimate and narrow Morningstar Economic Moat Rating.

For the quarter, revenue was $461 million, up 1% from the fourth quarter and an increase from sales of $411 million in the year-ago quarter. First-quarter sales exceeded the firm's January outlook of down 2%-6% sequentially, thanks to strong wireless telecom spending on 4G LTE infrastructure buildouts in China. The Chinese LTE buildouts helped increase PLD sales to the telecom and wireless segment by 14% quarter over quarter. Telecom and wireless is Altera's largest end market and accounted for 49% of total revenue in the quarter. As for the other end market segments, sales to industrial, military, and automotive customers grew 1%. However, revenue fell 20% and 3% quarter over quarter in the networking, computer, and storage segment and the other segment, respectively. Altera achieved a gross margin of 67.1%, down from 68.3% in the fourth quarter, because of product mix associated with higher telecom and wireless PLD sales. Operating income came in at $135 million versus $117 million last quarter.

Andy Ng does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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