2007 Investor Meeting

Transcription

1 2007 Investor Meeting December 11 th, 2007 Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

2 Forward-Looking Statements Statements in this presentation that are not historical are "forward-looking statements" as the term is defined in the Private Securities Litigation Reform Act of 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 CPLD or FPGA product mix or growth, competitive dynamics, ASIC design starts, market segment growth rates, revenue, operating margin, return on equity, gross margin, OPEX spending or other financial items discussed in this presentation as well as comments relating to new products, initial shipment dates, anticipated product rollout schedules, and share repurchase plans. Investors are cautioned that all forward-looking statements in this presentation 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, 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, successful and timely new product introductions, 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 presentation, 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. Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

3 Growth & Markets John Daane, CEO Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

4 Altera Revenue Growth Revenue Growth *: 12% CAGR Projected Revenue Growth 2007* 2012: 10-15% CAGR * Assumes Current Guidance for Q Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

5 2007 Financial Year-End Review 2007 Revenue declined 3%* Communications end market softness led by wireless infrastructure Industrial segment declined Stronger growth in consumer segment Solid progress reducing OPEX & improving overall operational efficiency Increased R&D expenses associated with 65-nm product rollouts & accelerated 45-nm development Started share dividend payments & accelerated share repurchase programs * Assumes current guidance for Q Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

6 2007: New Products Shipped Cyclone III - Industry s first 65-nm low cost FPGA Density, performance & significant power savings advantages High-end Stratix III FPGAs set new industry levels for density, performance & power Introduced low power MAXII Z: targeting wireless handheld applications Quartus development tools improved productivity, offering customers clear advantages via shorter development cycles, higher performance & lower power Accelerating development of 45-nm products Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

7 2002 Objectives & Results Re-establish FPGA Competitiveness Add High-Volume Revenue to Prototyping Revenue Growth *12% CAGR Gain Market Share * Assumes current guidance for Q Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

8 FPGA & CPLD Market Growth Innovate in FPGA Technology $3.0B $2.5B $2.0B $1.5B $1.0B $0.5B FPGA 37% CPLD 58% Larger Decline in CPLD Market CPLD Architecture limited scalability SRAM Process suited FPGAs Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

9 PLD Market Growth: Others 5% CAGR: 9% Others 6% CPLD 25% FPGA 70% CPLD CAGR 2% FPGA CAGR 11% CPLD 18% FPGA 77% 2002: $2.3B 2007: $3.6B* * Estimate based upon company reports and 4Q 2007 guidance; numbers may not add to 100% due to rounding Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera Others consist of Xilinx Support & Altera s Other categories.

10 Altera Market Share (%) E Change FPGA 27% 33% +6 pts CPLD 39% 37% -2 pts Total 31% 35% +4 pts * Includes estimate for CY 2007 Q4 based on mid-point companies guidance. Source: Altera estimates based on company reports Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

11 End Market CAGR: 2002 to 2007 End Market End Market CAGR (Gartner) % Altera CAGR % Communication Equipment Computer & Storage Consumer Industrial Total Source: Altera & Gartner estimates, communications excludes cell phone equipment Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

12 Custom Logic Ranking $28B ~ 5% Source: Gartner ASIC & PLD Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

13 ASIC % Design Starts by Technology Integration, Lower Cost, Performance Process Node 2002 % 2003 % 2004 % 2005 % 2006 % 2007 % 2008 % 2009 % µm µm µm µm µm µm µm µm µm µm L>0.5 µm Total #1 ASIC Design Technology #1 PLD Design Technology % 2011 % Dev. Costs $M <1 Increased Risks & Development Cost Source: Altera & Gartner Nov 07 Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

14 Faster Data Drives Processing Requirements Signal Processing Bandwidth Only FPGAs Can Best Meet Growth in Bandwidth Demand 1X 1xEVDO 4X HSPA 13X LTE GMACs Growth Rate Single Chip, 130nm to 65nm DSP FPGA GMAC: Giga Multiply & Accumulate Operations 5X 18X FPGAs offer a better cost, performance, power & integration platform for wireless infrastructure equipment PDA/ MobileTV Wireless DSL Source: A Technical Overview & Performance Evaluation, WiMAX Forum Aug 2006 Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

15 Migration to Multi-core Computing Parallel processing optimizes power/performance gains PLDs have benefited from this for >15 years Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

16 High Performance Computing: CPU Replacement Application Hough & inverse Hough processing Spatial Statistics Black-Scholes (floating point 2M points) Acceleration Factor 370x 96x 130x Co-processing solution for both Xeon and Opteron 16 Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

17 Altera Long-Term Growth Major Trends Drive Growth Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera 17

18 PLD Growth Opportunities $5.5B PLD $14B ASSP* $3.5B PLD $9.1B ASIC* $20.7B ASSP* $11.6B ASIC* $27B Source: Gartner Source: Gartner - ASICs & ASSPs in end markets serviceable by PLDs Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera $38B

19 End Market CAGR: 2007 to 2011 End Market All Semiconductor CAGR PLD Market CAGR Communication Equipment 5.1% 8.3% Computer & Storage 4.7% 4.2% Consumer 3.9% 12.5% Industrial 8.1% 17.0% Total 5.3% 11.8% Source: Gartner Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

20 CDMA Femtocell Base Station: ASIC/DSP Replacement WW Femtocell Market Estimate M Units CAGR 56% Application: Home Base Station Altera Value Proposition: Seamless migration from FPGA to structured ASIC Lower cost, shorter development cycle, & faster time-to-market than standard ASICs Source: Dell O ro Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera 20

21 High Definition TV Revolution: More PLD Content Broadcast Market Estimate $M 700 CAGR 17.5% Source: isuppli & Altera Applications: Complete video content generation through delivery Altera Value Proposition: Low power Cyclone technology High data rate Stratix DSP processing Format conversion & digital compression Fast time to market & flexibility High Definition Video Bandwidth 500X NTSC Switchers Servers Cameras Editors Encoders Transmitters Display Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera 21

22 Military: Secure Communications Software Defined Radio (SDR) Military Market Estimate $M 17% CAGR Source: Altera Application: Reconfigurable secure wireless communications Altera Value Proposition: Lower power consumption of Cyclone III Leadership in density & digital signal processing performance Quartus development tool productivity Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

23 Automotive: ASSP Replacement Automotive Market Estimate $M 38% CAGR Application: Driver Assistance, Display, Entertainment, Navigation Altera Value Proposition: Seamless migration from FPGA to structured ASIC Lower cost, shorter development cycle, & faster time-to-market than standard ASICs Source: Altera & Gartner Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera 23

24 Altera Triple Power Play 1 st Programmable Power Stratix III Core Fabric HardCopy Structured ASIC migration 1st ~Zero Power PLD using FPGA technology Portable wireless applications 1st 65-nm Low Cost FPGA & Optimized for 65-nm LP Process Ideal for power sensitive wireless baseband applications Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

25 Accelerated 45-nm Development Building on successful execution of Stratix 65-nm programmable power technology Proven test chip strategy and joint development program with TSMC Maintain our architectural leadership and regain process leadership Accelerate our density, performance & power leadership for all Stratix class applications Deliver first 45-nm products next year Drive further market share gains vs ASIC & PLD competitors Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

26 Altera Long-Term Growth Major Trends Drive Growth Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

27 Financial Model Tim Morse, CFO Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

28 2007 Financial Review >$1.2 billion cash returned to shareholders Executing $1.5B repurchase program - ahead of pace Initiated 1 st dividend in company s history Updated capital structure with $750M credit facility Exceeded 2007E cost commitments - great momentum Opex ~$60 million < original guidance SG&A ~$35 million (11%) vs. 06 Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

29 Financial Framework 10-15% Revenue >30% Operating Margin >30% Return on Equity Growth Altera Dynamics Efficiency Shareholder Value Game Plan PLD advantages & opportunities Penetrate new markets & increase content Technology & share momentum Leverage advantage differentiate & grow Internal cost & complexity too high Innovate, streamline, re-design, simplify Strong, sustainable cash generation Continue capital allocation evolution Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

30 Shareholder Value Return on Equity Return on Sales Asset Turnover Capital Structure Cash Generation Sources Uses US ops ~1/3 rd Fund growth Int l ops ~2/3 rds Dividend Empl. stock purchases Buyback Service debt US Cash Only $0.9 Equity $0.6 Liabs $0.5 Debt 2008E $2.0 Assets Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

31 Shareholder Value Return on Equity Return on Sales Asset Turnover Capital Structure >30% 21% Return on Equity 2007E 2008E Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

32 Financial Roadmap Gross Margin Deliver value Drive mix 64-66% +/- Operating margin accretive opportunities Cost Structure Simplification Geographic optimization Volume leverage 15% SG&A/Revenue 18% R&D/Revenue Cash Generation Working capital discipline Efficient tax structure Operating cash flow Quality of earnings Capital Allocation Dividend Share repurchase Capex frugality Dividend growth inline Buyback counter dilution+ Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

33 Cost Structure Management Cost-out Tracker (>100 Projects) ~$10M 07E Savings ~$30M 08E Savings Rigor & Accountability Be Lean Be Lean Logistics Outside services Facilities Capital goods Travel cost Tailored Approach Fund Growth High ROI Labor R&D masks/wafers Incentives Commissions Benefits Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

34 Compensation & Benefits Geographic Headcount Low-Cost Geographies High-Cost Geographies 29% 71% % 60% 2008E Compensation Philosophy 06 08E Headcount 15% 2% SG&A R&D Benefits Structure Manager/Individual Bonuses Annual Pay for Performance Altera Medical Contribution Altera 401k Match Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

35 Infrastructure San Jose Headquarters ($) Top 8 Other Offices ($) 10% 20% E Voice & Data ($) 8% E Other IT ($) 32% E E Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

36 Outside Services Consulting & Auditing ($)* Temp Help ($) 40% 65% E E Travel ($) 20% Legal ($)* 15% E E *Excluding restatement costs in 2006 Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

37 Opex Bridge ($M) $539* $22 $5 $(36) $530 SG&A (11)% SG&A (5)% R&D 7% R&D 2% 2007E Volume & Wage Inflation Foreign Exchange Cost Reductions 2008E All data estimated; Percentage figures = growth over prior year *Excludes 4Q 2007 restructuring costs Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

38 2008 Financial Guidance Gross Margin 64-66% Segment-mix dependent R&D ~$270M Slightly higher in 2H SG&A ~$260M Evenly weighted across quarters Other Income ~$30M $53M income, $(23M) interest Tax Rate 14-15% Includes R&D credit passage (2 pts) Diluted Share Count* ~310M ~315M 1Q, remaining quarters lower Capex ~$48M Includes $28M Penang addition All data estimated * Share count is a weighted average for the period identified Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

39 Beyond 2008 Growth in Revenue Growth in Spending Data Center Consolidation Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

40 Beyond Sensitivities Operating Margin Growth ~ +20% ~ +15% ~ +25% ~ +20% Revenue Growth +12.5% +8% +12.5% Spending Growth +6% +4% +3% Scenario A Scenario B Scenario C Scenario D Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera

41 Wrap-up 10-15% Revenue >30% Operating Margin >30% Return on Equity Growth Efficiency Shareholder Value Altera, Stratix, Cyclone, MAX, HardCopy, Arria, HardCopy, Nios, Quartus, Nios, Quartus, and MegaCore and MegaCore are trademarks are trademarks of Altera of Altera