Xilinx (NASDAQ:XLNX) Weakness Probably Wireless Inventory Correction

With the surprising negative pre-announcement by Xilinx (NASDAQ:XLNX), many companies slashed their numbers on the company, although Auriga says they see it probably related to an inventory correction in their wireless segment and not share loss.

Auriga noted, "We are lowering our estimates but maintain our rating and $29 price target on Xilinx following its negative pre-announcement for FQ311(December). We have preferred its competitor Altera (Nasdaq: ALTR)(Hold), based on expected market share gains at 40nm and 28nm, but this miss is more likely driven by an inventory correction than share loss as lead times normalize. Our sense is that end demand remains firm, though the recent licensing spectrum scandal in India may have caused a pause at some of the smaller carriers. In any event, consistent with our prior view, we still expect the ongoing inventory correction to be a multi-quarter event across broad-based semis.

"Our FQ311 (Dec) estimate goes to $570mln/$0.51 versus our prior estimate/consensus at $608mln/$0.58. We are also lowering our FY11 estimate to $2.35bln/$2.25 from $2.42bln/$2.39 (consensus at $2.42bln/$2.36) and FY12 estimate to $2.40bln/$2.23 from $2.46bln/$2.45 (consensus at $2.46bln/$2.30)."

Auriga maintains a "Hold" rating on Xilinx, which closed Wednesday at $28.63, up $0.24, or 0.85 percent. Auriga has a price target on them of $29.