Altera Announces Second Quarter Results

SAN JOSE, Calif.--(BUSINESS WIRE)--Altera Corporation (NASDAQ: ALTR) today announced second quarter 2007 sales of $319.7 million, up 5 percent from the first quarter of 2007 and down 4 percent from the second quarter of 2006. New products grew 26 percent sequentially.

Second quarter 2007 net income was $80.5 million, $0.22 per diluted share, compared with net income of $77.3 million, $0.21 per diluted share, in the second quarter of 2006.

Altera repurchased 14.1 million shares of its common stock during the quarter at a cost of $316 million. Altera ended the quarter with $1.3 billion in cash and investments. Year to date, Altera has repurchased 21.2 million shares at a cost of $462 million.

The company is currently negotiating a financing commitment letter to provide a long-term credit facility of up to $750 million. If finalized, the company’s current intention is to draw $500 million from this facility and use the proceeds to repurchase its common stock. The company would then intend to repurchase up to $1.5 billion of its common stock from the beginning of 2007 through the first half of 2008, up $500 million from the previous $1 billion repurchase plan.

Altera’s board of directors has declared a quarterly cash dividend of $0.04 per share payable on September 4, 2007 to shareholders of record on August 10, 2007.

“All of our new programmable devices and our HardCopy^® structured ASICs contributed to the new product strength we saw in the quarter. Following a two quarter industry correction, we are very pleased to see the resumption of sequential growth in the second quarter,” said John Daane, president, chief executive officer, and chairman of the board. “The third quarter will see the roll-out of the Stratix^® III high-end FPGA devices, the arrival of production-qualified low-cost Cyclone^® III FPGAs, and the remainder of the Arria^™ GX FPGA family, all of which will add to our growth potential in the coming quarters.”

Several recent accomplishments mark the company’s continuing progress:

• Introduced in software in May, the first production-qualified low-cost Arria GX FPGAs are now shipping. All members of this new family will be available on a production-qualified basis by September. These new transceiver-based devices are built on proven Altera transceiver technology delivering a comprehensive transceiver solution at an unparalleled price. Designed to provide the best levels of signal integrity, the family supports the three interface standards that are emerging as mainstream protocols – PCI Express, Gigabit Ethernet, and Serial RapidIO. The Arria GX family addresses the rapidly growing need for FPGAs with transceivers in cost-sensitive, high-volume communications, computer, storage, and industrial applications.
• Altera is now shipping the EP3C120 FPGA, the largest member of its newly introduced Cyclone III family, the industry’s only low-cost FPGA family manufactured on a 65-nm process technology. Product roll-out began in March and production-qualified devices will start shipping in August. The EP3C120 FPGA consumes only a fraction of the power required by other FPGAs of comparable capacity. It is ideal for a broad range of applications requiring both high integration and low power, such as wireless communications infrastructure, software defined radio, and video processing and imaging.
• For the second year in a row, Altera has been named to the Business Week Hot 100, a listing of the best performing growth companies with sales less than $1.5 billion. To be included in the list, Business Week ranks eligible companies based on three year sales growth, earnings growth and return on invested capital. Altera was one of only three semiconductor companies included in this year’s rankings.

Business Outlook for the Third Quarter 2007

Sequential Sales Growth    Flat to up 3%
Gross Margin               64% to 65%
Research and Development   mid-$70 million range
SG&A                       high-$60 million range
Other Income               approximately $13 million
Tax Rate                   13% to 15%

Conference Call and Quarterly Update:

A conference call will be held today at 2:00 p.m. Pacific Time to discuss the quarter's results and management's outlook for the third quarter of 2007. The web cast and subsequent replay will be available in the investor relations section of the company's web site at http://www.altera.com. A telephonic replay of the call may be accessed later in the day by calling (719) 457-0820 and referencing confirmation code 258712. The telephonic replay will be available for two weeks following the live call.

Altera's third quarter business update will be issued in a press release available after the market close on September 5, 2007.

Forward-Looking Statements

Statements in this press release that are not historical are "forward-looking statements" as the term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally written in the future tense and/or preceded by words such as "will," "expects," "anticipates," or other words that imply or predict a future state. Forward-looking statements include any projection of revenue, gross margin, expense or other financial items discussed in the Business Outlook section of this press release as well as comments relating to new products, initial shipment dates, anticipated product rollout schedules, intentions to secure financing, and share repurchase plans. Investors are cautioned that all forward-looking statements in this release involve risks and uncertainty that can cause actual results to differ from those currently anticipated, due to a number of factors, including without limitation, customer business environment, market acceptance of the company's products, product introduction schedules, the rate of growth of the company's new products including the Arria GX, Cyclone II, Cyclone III, Stratix II, Stratix III, Stratix II GX, MAX^® II and HardCopy device families, changes in the mix of our business between prototyping and production-based demand, the continuance of suitable financial market conditions and the ability of the company to secure desired financing, as well as changes in economic conditions and other risk factors discussed in documents filed by the company with the Securities and Exchange Commission from time to time. Copies of Altera's SEC filings are posted on the company's web site and are available from the company without charge. Forward-looking statements are made as of the date of this release, and, except as required by law, the company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

About Altera

Altera’s programmable solutions enable system and semiconductor companies to rapidly and cost-effectively innovate, differentiate and win in their markets. Find out more at www.altera.com.

Altera, The Programmable Solutions Company, the stylized Altera logo, specific device designations and all other words that are identified as trademarks and/or service marks are, unless noted otherwise, the trademarks and service marks of Altera Corporation in the U.S. and other countries. All other product or service names are the property of their respective holder.

ALTERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
		THREE MONTHS ENDED												SIX MONTHS ENDED
		June 29				March 30				June 30				June 29				June 30
			2007				2007				2006				2007				2006
Net sales		$	319,682			$	304,916			$	334,100			$	624,598			$	626,930
Cost of sales (1)			113,093				104,512				113,335				217,605				210,441
Gross margin			206,589				200,404				220,765				406,993				416,489
Operating expenses:
Research and development (1)			63,071				58,455				63,904				121,526				126,761
Selling, general, and administrative (1)			67,863				71,784				76,749				139,647				152,998
Total operating expenses			130,934				130,239				140,653				261,173				279,759
Income from operations			75,655				70,165				80,112				145,820				136,730
Interest and other income, net			17,985				17,113				10,781				35,098				23,214
Income before income taxes			93,640				87,278				90,893				180,918				159,944
Provision for income taxes			13,110				12,219				13,633				25,329				23,991
Net income		$	80,530			$	75,059			$	77,260			$	155,589			$	135,953
Net income per share:
Basic		$	0.23			$	0.21			$	0.21			$	0.44			$	0.38
Diluted		$	0.22			$	0.21			$	0.21			$	0.43			$	0.37
Shares used in computing per share amounts:
Basic			352,721				357,594				360,501				355,157				359,990
Diluted			359,542				363,648				367,092				361,595				367,070
Cash dividend paid per common share		$	0.04			$	-			$	-			$	0.04			$	-
Tax rate			14.0	%			14.0	%			15.0	%			14.0	%			15.0	%
% of Net sales:
Gross margin			64.6	%			65.7	%			66.1	%			65.2	%			66.4	%
Research and development			19.7	%			19.2	%			19.1	%			19.5	%			20.2	%
Selling, general, and administrative			21.2	%			23.5	%			23.0	%			22.4	%			24.4	%
Income from operations			23.7	%			23.0	%			24.0	%			23.3	%			21.8	%
Net income			25.2	%			24.6	%			23.1	%			24.9	%			21.7	%
Note:
(1)	Includes stock-based compensation expenses as follows:
	Cost of sales	$	321			$	333			$	554			$	654			$	1,077
	Research and development	$	4,918			$	5,513			$	7,977			$	10,431			$	15,901
	Selling, general, and administrative	$	7,404			$	7,257			$	10,158			$	14,661			$	20,624

ALTERA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		June 29				March 30				December 29
			2007				2007				2006
Assets
Current assets:
Cash and short-term investments		$	1,169,813			$	1,279,996			$	1,363,747
Accounts receivable, net			188,486				130,451				93,263
Inventories			73,532				83,156				78,477
Deferred compensation plan assets			70,951				73,206				69,378
Deferred income taxes and other current assets			142,930				144,520				146,187
Total current assets			1,645,712				1,711,329				1,751,052
Long-term investments			134,921				245,902				256,563
Property and equipment, net			182,319				184,774				178,363
Deferred income taxes and other assets, net			65,034				67,494				47,282
		$	2,027,986			$	2,209,499			$	2,233,260
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and current liabilities		$	97,762			$	130,515			$	243,727
Deferred compensation plan obligations			70,951				73,206				69,378
Deferred income and allowances on sales to distributors			273,799				280,817				298,078
Total current liabilities			442,512				484,538				611,183
Income taxes payable non-current			142,430				134,387				-
Other non-current liabilities			14,433				13,820				13,916
Stockholders' equity			1,428,611				1,576,754				1,608,161
		$	2,027,986			$	2,209,499			$	2,233,260
Key Ratios & Information
Current Assets/Current Liabilities			4:1				4:1				3:1
Liabilities/Equity			1:2				1:2				1:3
Annualized YTD Return on Equity			20	%			19	%			23	%
Quarterly Depreciation Expense		$	7,468			$	7,479			$	7,133
Quarterly Capital Expenditures		$	5,013			$	13,890			$	10,692
Annualized Net Sales per Employee		$	469			$	461			$	506
Number of Employees			2,696				2,642				2,654
Inventory MSOH (a): Altera			2.0				2.4				2.3
Inventory MSOH (a): Distribution			1.2				1.3				1.3
Days Sales Outstanding			54				39				27
(a) MSOH: Months Supply On Hand
Note:
Certain reclassifications have been made to prior period balances in order to conform to the current period's presentation.

ALTERA CORPORATION
REVENUE SUMMARY
(Unaudited)
												Q-Q			Y-Y
			Q2'07			Q1'07			Q2'06			Growth			Growth
Geography
North America			21	%		22	%		25	%		2	%		-19	%
Asia Pacific			33	%		33	%		27	%		7	%		19	%
Europe			25	%		25	%		24	%		2	%		-2	%
Japan			21	%		20	%		24	%		9	%		-17	%
International			79	%		78	%		75	%		6	%		1	%
Total			100	%		100	%		100	%		5	%		-4	%
Product Category
New			30	%		25	%		17	%		26	%		69	%
Mainstream			32	%		32	%		36	%		5	%		-15	%
Mature & Other			38	%		43	%		47	%		-7	%		-23	%
Total			100	%		100	%		100	%		5	%		-4	%
Market Segment
Communications			40	%		39	%		44	%		6	%		-12	%
Industrial			35	%		37	%		34	%		-1	%		-2	%
Consumer			16	%		15	%		13	%		11	%		11	%
Computer & Storage			9	%		9	%		9	%		12	%		-1	%
Total			100	%		100	%		100	%		5	%		-4	%
FPGAs and CPLDs
FPGA			70	%		72	%		70	%		3	%		-3	%
CPLD			19	%		19	%		21	%		3	%		-16	%
Other			11	%		9	%		9	%		19	%		16	%
Total			100	%		100	%		100	%		5	%		-4	%
Product Category Description
	Category	Products
	New	Stratix II, Stratix II GX, Arria GX, Cyclone II, Cyclone III, MAX II, HardCopy and HardCopy II
	Mainstream	Stratix, Stratix GX, Cyclone, and MAX 3000A
	Mature & Other	Classic, MAX 7000, MAX 7000A, MAX 7000B, MAX 7000S, MAX 9000, FLEX 6000, FLEX 8000, FLEX 10K, FLEX 10KA, FLEX 10KE, APEX 20K, APEX 20KE, APEX 20KC, APEX II, ACEX 1K, Mercury, Excalibur, configuration and other devices, intellectual property cores, and software and other tools