Analyst Conference Summary


conference date: April 23, 2008 @ 2:00 PM Pacific Time
for quarter ending: March 29, 2007 (fiscal Q4 2008)

Forward-looking statements

Overview: Struggling for growth, but still very profitable on operating efficiency. Sales outlook uncertain.

Basic data:

Revenue $475.8 million, flat sequentially from $474.8 million and up 7% from $443.5 million year-earlier.

Net income was $96.5 million, down 7% sequentially from $103.6 million, but up 10% from $87.6 million year-earlier.

EPS (earnings per share) was $0.34, down 3% sequentially from $0.35, but up 26% from $0.27 year-earlier.


Fiscal Q1 2009 (ending June 2008): revenues growing from -1% to +3%. Gross margin 63% to 64% on flat operating expenses. 21% tax rate. Fully diluted share count 280 million.

Conference Highlights:

Quarterly cash dividend increased to $0.14 per share.

GAAP net income included "pre-tax charges of $4.7 million for a capital loss on a stock sale and $2.9 million related to impairment losses on equity investments, or approximately a $0.02 per diluted share reduction after tax."

New Products led by Virtex-5 FPGAs increased revenue 10% sequentially to represent 38% of total sales.

63.4% gross margin was the highest in years as Xilinx worked on operating efficiency. Operating margin was 24.6%.

By geography, revenues: 38% North America, 28% Asia Pacific, 23% Europe, 11% Japan, with North America down sequentially but the others up. Y/Y, the main interest is Asia Pacific up 18%.

By end market, revenues: 42% Communications, 33% Industrial, 17% consumer and automotive, 8% data processing. Sequentially nearly flat with slight declines in consumer and data, but a slight increase in communications. Y/Y Industrial was up 17% and consumer and automative up 10%, with communications nearly flat and data processing down 6%.

New product revenue was 38%, Mainstream 42%, Base 14%, support 6%.

New products continue to be developed and produced, including Design Suite 10.1, which integrates the entire line of design tools. "Xilinx estimates that it currently supplies over 90% of the PLD industry's 65nm sales."

Virtex-5 over 7% of revenue. Over 1/3 revenue from 65nm & 90nm products. Virtex family 55%, Spartan 25%, CPLD 9% of overall revenue.

Cost of revenues was $174 million. Gross margin $302 million. R&D expense 91 million. SG&A $92 million. Amortization $1 million. Making total operating expenses $185 million and leaveing operating income of $117 million. There was a $3 million loss on investments and $5 million gain from interest income. $23 million income tax provision (20% tax rate).

Net cash and equivalents ended at $900 million. Inventories shrank to $130 million. $200 million was spent on share repurchases during quarter. $800 million new repurchases authorized in February.

Increased backlog entering June quarter and first few weeks sales have been good. Expect communications up and other markets flat to down.

PLD field is ripe for growth due to increasing costs of ASICs and ASSPs leading to narrowing of availability to fewer high volume designs.


Consumer and Auto weakness? What happened here was only slightly weaker than we anticipated. Auto was not really a factor.

Linearity? March was a typical good, solid month. Modest start in January and picked up during quarter.

Europe? Seeing stength in larger customers, maybe some weakness in channel sales so far this quarter.

Long term growth rate? Last time we said 9 to 13% a year, we just had a lower year so we have to re-examine that, which we may do in June.

Why not pay a Microchip (MCHP) type of dividend? We are always reviewing our cash strategy.

Telecommunications growth areas? We are well positioned to benefit from LTE and Wi-Max roll-outs, but those have been delayed. We had good networking in North America. Asia was strong across communications in general, with Japan not being strong in wireless.

Seasonality? June tends to be a softer month historically. Add in caution from macroeconomic issues, and that gives the low end of guidance.

Move to 45nm? In past leader in bringing out new technology nodes. Working to keep lead we have in 65nm in next mode, but no product or schedule announcement at this point in time, but this is where most of our R&D effort is focussed.

Other companies were strong for wireless in Asia? We did well in wireless in Asia, but not in Europe.

UMC? Xilinx has worked with them a long time. Any change in investment has nothing to do with their productivity or our use of them for manufacturing.

Software is very important to our business. Customers are designing many varied, complex sytems, so the design software is as important as the chips they are programming. But many designers use third party tools. It is important to support those tools.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2008 William P. Meyers