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New Product Growth Drove Xilinx’s Fiscal 2Q16 Profit

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New product sales drive Xilinx’s revenue

In the last part of the series, we saw that Xilinx (XLNX) reported sales of $528 million—down 13% YoY (year-over-year) and 4% quarter-over-quarter. This was in line with the company’s fiscal 2Q16 guidance of a 2%–6% quarterly fall in revenue. The company’s revenue was driven by a 20% YoY growth in new product sales.

Revenue by segment

On a quarter-over-quarter basis, the company’s sales from the Communications & Data Center segment rose 5%. This offset a 12% fall in sales from the Industrial, Aerospace & Defense segment. The Broadcast, Consumer & Automotive segment’s sales fell 3% over the quarter.

Avnet (AVT) is the key distributor. It accounts for over 50% of Xilinx’s sales worldwide.

Revenue by product

Xilinx’s new products, the Zynq-7000 family and the 20-nm (nanometer) UltraScale family, were the highest performing products during fiscal 2Q16. The sales exceeded the $15 million forecast. The company expects sales from the 20-nm products to exceed $20 million in fiscal 3Q16—driven by demand from wired communication. Recently, the company shipped its 16-nm multiprocessor SoC Zynq UltraScale+. It was built using Taiwan Semiconductor Manufacturing Company’s (TSM) FinFET Plus process.

Xilinx follows a fabless business model. It designs and develops a product. It outsources the manufacturing to a third-party foundry. It derives most of its sales from new products designed for the latest generation electronic systems. Mainstream products are older than new products and base products are older than mainstream products.

Revenue by geography

Asia-Pacific and North America are Xilinx’s major markets. They accounted for 70% of the company’s revenue in fiscal 2Q16. The remaining 30% comes from Europe (EFA) and Japan. The company reported a double-digit YoY sales fall of 19% and 17% from North America and Europe, respectively.

Competition

Xilinx dominates the PLD (programmable logic devices) market. It had a 49% share in 2014. It’s followed by Altera at 38%. However, Intel’s (INTC) entry into this market with the acquisition of Altera poses a threat to Xilinx.

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