Dylan McGrath EE Times (01/26/2010 1:25 PM EST)

SAN FRANCISCO—Wall Street analysts gave programmable logic vendor Xilinx Inc. generally high marks on the company's announcement of record quarterly revenue last week, but at least some noted concerns about Xilinx inventory.

Ian Ing, an analyst at BroadPoint Amtech, reduced his firm's price target for Xilinx stock slightly, citing concerns about inventory. In a report, Ing said some investors may be concerned about the rise in company inventory and noted that combined inventory is expected to decline sequentially from 85 days of inventory, versus a target of 90 to 100 days. Ing also noted that Xilinx remains "severely behind" safety stock levels, alluding to a comment made by Xilinx Chief Financial Officer Jon Olson on last week's earnings call.

Olson said Xilinx knew it was severely behind on its safety stock and made a commitment to build inventory last quarter. He described the effort as "relatively successful," though not as successful as Xilinx had forecast.

"We feel we are in a reasonable safety stock position," Olson said. "That doesn't mean that across the board we feel comfortable that all our parts are at the right level of safety stock. But we are ahead of where the long term forecast say we need from our customers, so we have adequate supply."

Christopher Danely, an analyst with JP Morgan, said in a report that he was concerned about the decline in lead times for some Virtex-5 FPGAs, which Danely noted made up more than 20 percent of Xilinx' revenue. Lead times for some Virtex-5s have declined to between four and six weeks, down from 14 to 16 weeks, Danely said. "As a result, we are concerned Xilinx could experience push-outs later in the quarter," Danely said.

BroadPoint maintains a "buy" rating on Xilinx stock. JP Morgan maintains a "neutral" rating. RBC Capital Markets last week upgraded its rating on Xilinx' stock to "outperform" from "sector perform." Since the earnings announcement was issued, Xilinx' stock value has increased from $23.80 to about $24.30 as of early afternoon trading Tuesday (Jan. 26).

Ing noted that, despite record revenue of $513.3 million for the third quarter of the company's fiscal 2010, Xilinx still has room to grow, with CEO Moshe Gavrielov saying on the analyst call that revenue from six of 10 end markets has yet to return to peak levels prior to the economic recession. Gavrielov said the markets that have yet to regain peak revenue levels include: wired communications, industrial/scientific/medical, audio/visual/broadcast, test and measurement, computing, and storage.

Also on the call, Gavrielov side-stepped a question about which foundries Xilinx would contract for work at the 28-nm node, saying, "We don't have any announcement along those lines yet."

Ing said in a recent report that Xilinx is set to switch to leading foundry Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) at the 28-nm node. If Xilinx does move to TSMC, it could give the company a boost in getting to the 28-nm node, since TSMC has a technology lead over United Microelectronics Corp. (UMC).

Xilinx declined to comment on Ing's TSMC speculation. Later, in an announcement about Virtex-6 moving to volume production at 40-nm, Xilinx seemed to take pains to praise UMC and tout its longstanding relationship with the foundry.

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