April 23, 2008 - Xilinx Inc. (XLNC-NASDAQ) is a top supplier of field-programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). Customers can program these integrated circuits to perform specific functions, thereby achieving greater design flexibility while cutting time to market. Xilinx also offers a broad range of design software and intellectual property used to customize its chips. The company sells to manufacturers -- including Agilent, Cisco Systems, IBM, and Sony -- in the telecommunications, computer, aerospace, industrial control, and networking markets. Customers outside the US account for about 65% of the company's sales.

Earnings are the usual driver here. They've been improving nicely since 2001 when they came in at 32 cents a share (the year before they were $1.08). In 2002, they went to 49 cents a share, then 77 cents. In 2004, eps were 89 cents, then $1.00, followed by $1.02. In 2007, analysts think the bottom line will be $1.30, then $1.50 next year. (Fiscal year ends March 31. Earnings will be released Wednesday, 4/23.) Quarterly earnings are expected to be 37 cents a share. Last quarter (the third quarter) revenues were up 7% from the same quarter of the previous year while earnings jumped by 40% to $103.6 million or 35 cents a share, well ahead of analysts' prediction of 32 cents. The company said stronger than expected sales in the defense and consumer applications accounted for the improvement.

The company is taking some of its strong cash flow and buying back its stock. The board of directors approved an $800 million buyback program. There are 286.317 million shares outstanding. The board also approved an increase in the quarterly dividend to 14 cents a share, up from 12 cents.

Analyst David Wong from Wachovia Capital Markets gave the stock an outperform rating, explaining that Xilinx expects communications revenue to climb on strong demand for networking infrastructure in Japan and China. In addition, consumer revenue in that region is expected to be above normal as the 2008 Olympic Games approaches. The strong quarter, attractive valuation, and the share repurchase plan also add to Xilinx's bullish story. "As the largest supplier of programmable logic device chips (PDL), Xilinx benefits form high profitability, stable pricing environment, and low capital requirements."

The company is enjoying increased sales even in North America. Margins are widening thanks to better manufacturing efficiencies and yield improvement on the 90-nanometer and 65-nanotmeter process technologies. Expect efficiencies to improve even more, just as strong demand for new products increases.

More numbers: Return on Equity was 21.5% in 2007. Look for 24.5% in 2008. Currnet assets are over 5 times current liabilities. Debt is 35% of the balance sheet. The net profit margin was 21.1% in 2007 with analysts predicting 22.5% in 2008. Book value is $6.09.

Xilinx seems to have it all together: better efficiencies, higher sales in all regions, including North America, a stock buyback to shrink outstanding shares, and good numbers from ROE to Net Profit Margins. The only thing that might stop the recent turnaround in the stock price is the industry as a whole. It's known for being volatile and when demand decreases, XLNX will feel it.

- Company Web site: www.xilinx.com

- Ted Allrich