Here's what S+P has to say about XLNX, fwiw:
Sub-Industry:
Semiconductors
Summary: Xilinx is the world's leading supplier of programmable logic chips and related development system software.
Overview 07-AUG-02
We expect sales to increase 14% in FY 03 (Mar.), and 23% in FY 04, as a new semiconductor industry upcycle begins. Quarterly revenue flow began to turn positive in late 2001, and upward progress should continue after some seasonal weakness in the September quarter of 2002. The inventory levels of PLD chips have returned to normal levels. Demand for the company's chips for use in telecommunications and data processing equipment should pick up in 2003, if the economy strengthens as we expect. Customer satisfaction with the advanced Virtex-II and Spartan product lines remains strong; advanced products rose to 53% of sales in the quarter ended June 2002. Gross margin should widen back to historical norms near 60% in FY 03. Overall, we expect EPS (EBG basis, excluding goodwill, acquisition and other charges) of $0.52 in FY 03, with improvement to $0.80 (EBG basis) for FY 04.
Valuation 07-AUG-02
XLNX earns about 61% of revenue from various communications markets, and the slowdown at manufacturers of wireline telecom equipment has especially hurt results. However, wireless markets have fared better, as have the storage and server markets (19%), and other segments (20%). In the long run, the high-end programmable logic device (PLD) market remains a high-growth segment, and we believe XLNX can deliver core EPS growth in excess of the chip industry's historical 17% annual rate. The shares recently traded near 22X our $0.72 calendar 2003 EPS estimate, which is above the broader market. Stock options expense in FY 02 as estimated under SFAS rule 123 was $0.34, which is moderately large compared to peer levels. Despite some near-term pressures, we think this market-share leader in PLDs deserves its valuation premium, and maintain our accumulate recommendation.
Business Summary 07-AUG-02
Founded in 1984, Xilinx is the leading supplier of programmable logic devices. These devices, commonly known as PLD chips, include field programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). They are standard integrated circuits that are programmed by customers to perform desired logic operations. They provide high levels of integration, and create significant time and cost savings for electronic equipment manufacturers in the telecommunications, networking, computing and industrial markets.
While FPGAs account for the vast majority of XLNX's sales, the company also derives revenue from development and system software tools, and field engineering support. In FY 02 (Mar.), revenues were derived 52% from the U.S. (62% in FY 01), 23% (20%) from Europe, 13% (10%) from Japan, and 12% (8%) from Asia Pacific and other regions.
XLNX's FPGAs are proprietary integrated circuits designed by the company; they provide a unique combination of the high logic density usually associated with custom gate arrays, the time-to-market advantages of programmable logic and the availability of a standard product. XLNX has several product families, including the XC4000, Coolrunner, Spartan and Virtex lines. The Virtex-II Pro product line, introduced in March 2002, is a platform for programmable systems, enabling very high-bandwidth system-on-a-chip designs with the flexibility and low development cost of progammable logic.
Company products are classified as base, mainstream, advanced and support. Base products are manufactured using mature 0.5-micron and larger linewidth technology and accounted for 20% of FY 02 sales (29% in FY 01). Mainstream products, produced using 0.22- to 0.35-micron processes, accounted for 35% of FY 02 revenues (46%). Advanced products are made with 0.18-micron and smaller technologies, and provided 38% of FY 02 sales (18%). Support products contributed over 7% of FY 02 sales (7%).
As a fabless semiconductor maker, XLNX does not directly manufacture wafers for its products. Instead, it contracts for wafer production from chip foundries, including United Microelectronics Corp. (UMC) in Taiwan and Seiko Epson Corp. in Japan. In FY 02, XLNX entered a custom sales agreement with IBM and gained the right to purchase wafers from IBM. The company maintains an equity position in UMC which was valued at $380 million as of March 31, 2002.
Revenue by end-market as of the first quarter of FY 03 was divided: 61% communications, 19% storage and servers, and 20% other.
The company has not carried any long-term debt since 1998, creating a margin of safety in industry downturns. |
