Wachovia Cuts Xilinx Rating

Analyst Karl Motey cites indications of soft demand across communication end-markets

Xilinx (XLNX ) sees a 5% to 7% sequential revenue decline in the second quarter. Wachovia cut its investment rating on the stock to market perform from outperform.

Analyst Karl Motey says channel checks indicate soft demand across communication end-markets like storage, networking, and telecom. He notes Xilinx management cited ongoing softness across North America and Asia-Pacific. Motey believes the second-quarter revenue decline means longer inventory digestion time than he previously expected. Due to lower volume, days of inventory has risen to 155 from 135-140. Based on lower guidance, reduced visibility, lower confidence on fourth-quarter estimates, and higher inventory levels, the analyst cut hiss $1.17 fiscal 2005 (ending March) EPS estimate to 99 cents, and his $1.37 fiscal 2006 EPS forecast to $1.16. He has a $28 to $31 price target on the stock.

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