Xilinx Inc. (XLNX) yesterday upgraded its guidance for the third quarter of fiscal 2010.

The company now expects sales in the third quarter to increase 16% – 20% sequentially, up from the previous guidance of around 6% – 10%. The new guidance implies revenues between $481 million and $498 million in the December quarter.

Management increased sales guidance primarily due to broad-based strength across all end market categories and geographies. The company now projects a gross margin of around 64%, up from the earlier estimate of 62% – 63%.

The company is expected to report third quarter results on Jan 20, 2010. Following the update in guidance, the company’s shares rose 2.28%.

Xilinx earlier reported a solid second quarter driven by strong growth in all products. In particular, sales from consumer automotive and data processing categories grew 27% and 31% respectively on a sequential basis.

Europe and Japan posted the strongest growths of 15% and 26%, respectively. Growth in Japan was driven by consumer and communications applications, while Europe experienced a broader base of end markets Incorporatedluding communications, industrial and audio-video broadcast.

Later in the day, top player Texas Instruments Inc. (TXN) raised its outlook for the fourth quarter, driven by improved demand in chips used in cell phones and other electronic gadgets such as hard disk drives and video game consoles. Management stated that October and November were both strong months for the company.

Last week, rival Altera Corporation (ALTR) upgraded its guidance for the fourth quarter of 2009. The company now expects sales to increase by 15% ? 18% from the third quarter level of $287 million, up from the previous guidance of sales growth around 6% ? 10%. Management expects revenues from all vertical markets to be up sequentially in the fourth quarter, reflecting a strong new product cycle as well as improving end-market trends and customer desire for appropriate inventory to support sales levels.

This clearly signals a strong recovery in semiconductor markets, which were hit hard by the global economic downturn a year ago.

Xilinx was earlier plagued by supply issues that affected the first quarter results, but management seems to be keen on ironing out deficiencies in operations by the December quarter. We believe the company’s growth will reaccelerate, given the competitive advantages of its 90 nm and 65 nm technologies.

California-based Xilinx designs and manufactures a broad range of high-performance, high-density programmable logic devices (PLDs) for electronic equipment manufacturers.

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