Is Xilinx A Buy? Pacific Crest Thinks So

In a report published Tuesday, Pacific Crest analysts upgraded the rating on

to Overweight. The price target was set to $60. "We believe the breakdown in Dennard scaling and Dark Silicon represent a significant opportunity for FPGAs, particularly in the data center, as server processors are unable to keep up with exponentially increasing performance requirements in the data center," the analysts said. This could lead to significant growth opportunities for FPGAs, in terms of improving compute performance at nominal cost, especially in the cloud and high performance computing data center segments. Although Xilinx has lagged behind the hardware acceleration market, the analysts believe that the company would benefit from increased FPGA acceleration in the data center industry. In addition, the acquisition of

by

could actually prove beneficial for Xilinx. The analysts believe that anti-trust scrutiny would not allow the combined Altera-Intel entity to monopolize data center opportunities. Also, the analysts expect Intel to be more concerned data center growth opportunities and to be likely to "not focus on the broader FPGA business opening up opportunities for XLNX to gain market share." On the other hand, the acquisition of Altera might prompt Xilinx to consider partnering with another semiconductor company. According to the Pacific Crest report, "Because a breakdown in semiconductor physics has resulted in declining marginal processor improvements, we view the acquisition of ALTR by INTC as strategic given the growth opportunity for acceleration in the data center."