Xilinx (XLNX), a maker of programmable chips, is slowly but steadily turning around, although the degree of its turnaround might not be up to the Street's liking. When the company posted its third-quarter results, there were undeniable signs of robust growth in its various segments, but a less-than-spectacular outlook weighed on the shares.  

However, at 23 times trailing earnings, Xilinx presents good value, especially considering that its innovation is reaping results, and clients such as China Mobile (CHL) and Cisco (CSCO 0.37%) can ensure sustained growth in the future. In addition, growing demand from the automotive and industrial end markets should aid Xilinx's growth, along with innovative products.

Gaining momentum
Xilinx's new chips helped it record impressive revenue growth in the previous quarter, and this trend looks set to continue. Its 28-nanometer programmable chips, which enable customers to program them and run different applications on low power, clocked $100 million in sales in the previous quarter -- close to 20% of total revenue.

Xilinx expects that it will be able to capture 70% of the market of this 28-nm chip by the end of the current quarter and comprehensively exceed its goal of achieving $250 million in revenue from this product line this fiscal year. On a broader scale, sales of Xilinx's new products were up 80% year over year in the previous quarter and accounted for nearly 40% of total sales.  

Looking ahead, Xilinx should find enough traction with the 28-nm platform. This particular node is expected to account for one-fourth of the programmable logic devices, or PLD, market that's expected to increase 10% this year to $4.7 billion, according to Nomura. Xilinx is the biggest player in this segment and is seeing good demand due to the LTE deployment in China -- factors that should help it make the most of the industry's growth.

Xilinx counts key China Mobile suppliers Huawei and ZTE as clients, and this will prove crucial going forward. Last year, it was reported that Huawei and ZTE won 50% of China Mobile's initial TD-LTE tender. Now, as China Mobile continues to expand and strengthen its LTE network, it might incur record high capital expenditures this year, as Forrester's Bryan Wang suggests, spurring demand for Xilinx's programmable chips. What's more, Xilinx management itself expects a jump in demand as a result of the LTE buildout in China.

A sizable opportunity
However, Xilinx saw some weakness in the telecom and data-center market as a result of seasonality. But the long-term opportunity remains pretty strong in this segment. Going forward, it is expected that an increase in the number of connected devices will lead to more demand for enterprise infrastructure and data centers. For example, the Internet of Things that Cisco is aggressively pursuing will result in 50 billion connected objects by 2020. Cisco puts the potential of this market at $19 trillion.

The resulting data boom will call for better and more infrastructure, opening up an opportunity for Xilinx to sell more of its programmable chips. The field programmable gate arrays that Xilinx deals in are expected to play an important role in enabling the Internet of Things,  and the fact that Cisco is a Xilinx customer is another advantage. Xilinx received the 2013 Supply Chain Security Champion Award from Cisco last year, which goes to show its positioning as the networking bellwether. 

Final words
All in all, Xilinx doesn't look like a bad deal. The stock is cheaper than peers Altera and Lattice Semiconductor, and it also has a dividend yield of 2.20%. Xilinx's new products are being adopted by customers, and the company seems to have some good catalysts that could take it to new highs in the future.