Altera sees weaker 1Q

February 27, 2001: 6:19 p.m. ET

Chipmaker blames inventory buildup for quarterly revenue decline

NEW YORK (CNNfn) - Semiconductor maker Altera Corp. warned Tuesday that its first-quarter revenue will be substantially lower than previously expected.

The company, which makes programmable logic chips used mostly in communications devices, said it expects sales for the quarter ending in March to come in roughly 20 percent below the $368 million it reported in the fourth quarter of 2000.

Wall Street had generally expected Altera to log sales of about $412.6 million for the first quarter, suggesting a 12.1 percent increase, according to a survey by earnings tracker First Call.

As have most chipmakers which have warned recently, executives at Altera in San Jose, Calif., blamed the shortfall on a buildup of inventory in the distribution channel combined with a sudden slowdown in sales.

"An industry-wide inventory correction began in the fourth quarter, and now reduced end market consumption is exacerbating the impact of that correction," John Daane, Altera's chief executive said in a statement.

"We are seeing the effects of reduced capital spending by service providers and other communications market end customers impact our customers' business and hence their purchases," Daane added. "The slowdown in end market activity is prolonging the inventory correction, but we believe that moderate sequential revenue growth will resume in the second half."

Altera is not the only components supplier to have been stung by the slowdown in telecom spending and rising inventory levels.

Earlier this month, executives from Broadcom (BRCM: Research, Estimates) told investors that the company's revenue growth for the year will be less than they recently had expected.

JDS Uniphase (JDSU: Research, Estimates), the No. 1 maker of components used in fiber-optic networking equipment, recently lowered its growth forecasts as well, saying that many of its service-provider customers in the U.S. have either deferred or reduced their capital spending plans in the face of the slowing economy.

Altera did not say specifically how much of an impact the first-quarter revenue shortfall will have on its earnings per share. The most recent expectations had been for Altera to turn a profit of 22 cents per share during the quarter and 94 cents for the entire year, according to the First Call survey.

Shares of Altera (ALTR: Research, Estimates) fell $2.06 to $23.38 in Nasdaq trade ahead of the announcement, which it made after the close of trading. They fell another $1.12 to $22.25 in after-hours trade.