I agree with you, I just wanted you to be careful about comparing to the very low inventory during allocation. As for shifts in the market, these happen very slowly in FPGA since they are "designed in." Unlike memories and such, XLNX can't be used in an ALTR socket and vice versa.
Your covered call hedge is probably prudent. My hunch is ALTR has overly simplified the recent problems for Wall Street consumption. Me thinks there is a smoke screen at work. One of the main causes of declining demand in FPGAs, other than a precipitous downturn in the end equipment segments, is Gate Array replacement.
It is pretty easy to redesign a hi volume gate aray to take the place of an FPGA. There are even gate array vendors who specialise in just this segment. Yet conversion isn't pervasive, mainly based on "If it ain't broke, don't fix it," and "the system is cheap enough, profitable enough, or far enough into its lifecycle that it doesn't matter whether it can be made more cheaply." Yet when a high profile piece of business does get designed out it can sting like crazy. Imagine you are shipping $5M per month to a very large system customer and all of a sudden that revenue goes away, due to a lower cost gate array socket replacement. It is damned hard to replace that revenue loss with new designs or broad based distribution business.
I suspect Altera experienced some drop off in demand at some major customers based on this theory. I think it is easier to explain away a down quarter based on "rubber band" inventory corrections in the channel and the customer base than to get into the discussion of losing production designs to lower cost replacements, and the pandora's box that is open when you start this discussion.
The good news here is that these glitches are usually short lived, and the usual strong growth curve returns pretty quickly. As long as Altera has given sound guidance to the street regarding revised Q3 and Q4 revenue and EPS levels then all's well. If however there is more stink behind the smoke, then look out. Before I declare my "hold" over I wanna see reassurance of Q3 being on-target with street expectations.
-tt |
