Programmable chipmaker Xilinx (NASDAQ:XLNX) was in free-fall mode last week after reporting its fourth-quarter results. Xilinx's earnings were worse than analyst expectations, and so was the company's outlook. As a result, the stock took a massive beating and declined almost 10% after the earnings report. The company struggled as a result of weak chip sales and delays by customers such as China Mobile (NYSE:CHL). In addition, it is likely that competition from peer Altera (UNKNOWN:ALTR.DL) has also been hurting Xilinx.

With this, Xilinx's outstanding performance in 2014 has hit a major bump. But, will the company be able to script a turnaround? More importantly, is Xilinx's drop an opportunity in disguise?

Not so pretty
Xilinx's outlook failed to meet estimates because the company expects weak demand from aerospace, defense, and wired telecom customers. Communications is Xilinx's biggest end-market segment, which accounts for almost half of all revenue. As such, weakness in this area will have a big impact on the company's performance.

In the current quarter, Xilinx forecasts a decline in orders from a couple of big customers. In addition, aerospace and defense will also remain weak. So, decreases in two of Xilinx's main business segments are why the company is in a precarious spot right now.

Xilinx supplies chips to telecom player China Mobile, which is aggressively rolling out LTE in the Middle Kingdom. However, given the scale of the LTE rollout in China, there could be delays. This is why even chip giant Qualcomm guided for weaker-than-expected earnings when it released its second-quarter results. The transition from legacy networks to a faster TD-LTE platform is leading to a drop in demand for current-generation technology, and this could be one of the reasons why Xilinx's guidance came in weak.

Look at the long run
From a long-term perspective, the rollout of LTE in China should be a tailwind for Xilinx. Investors should focus more on where Xilinx is headed in the long run, rather than pay much attention to its short-term guidance.

China Mobile is another big opportunity. Although the deployment might have hit a speed bump and gotten delayed, things should get better going forward. This year, China Mobile is projected to spend as much as $14 billion on LTE deployment in a bid to extend its coverage to 350 cities by the end of 2014.

In addition, Huawei and ZTE are the key beneficiaries of China Mobile's LTE initiative, and the good point is that Xilinx is a supplier to both. Moreover, the other two major Chinese telecom carriers -- China Unicom and China Telecom -- are also moving ahead with their own LTE deployments. As such, one weak guidance shouldn't scare Xilinx investors, as the company is sitting amid a lot of opportunity in China.

While wired communications turned in a weak performance, Xilinx is seeing good demand for its data center products. Going forward, this segment should continue growing, as the global data center construction market is expected to grow at a robust annual rate of 22% until 2018.

On the other hand, Xilinx's troubles in the aerospace and defense segment might also be short-lived. According to IHS Jane's Annual Defence Budgets Review, the global defense budget in 2014 will rise for the first time since 2009. Even aerospace spending is expected to remain strong, as aluminum producer Alcoa would have us believe.

Alcoa expects the global aerospace industry to grow 8%-9% this year, driven by huge backlogs at major players such as Boeing and Airbus. As such, looking beyond just one quarter, there's a good chance that Xilinx's strong revenue growth would continue.

Analyzing the threat
Xilinx isn't the only manufacturer of programmable logic devices that's trying to benefit from LTE deployment in China and across the world. Rival Altera has made some solid moves of late, entering into a foundry agreement with Intel and pushing forth the development of its 14-nanometer process.

In fact, equipment maker Ericsson was seen moving away from Xilinx to Altera last year, sparking concerns. Altera's rise has been helped by the fact that the company is also focusing on 28-nm products, leading to intense competition since Xilinx is also trying to tap the same market.

Looking forward, Altera believes that it would be able to capture half of the field programmable gate array market in the next five years with its 14-nm technology. Since this market is expected to be as big as $9 billion by 2019, Xilinx will need to pull up its socks and fight Altera. 

The takeaway
All in all, it looks like Xilinx's woes are short-term in nature. There will be periods of weakness in every industry, and Xilinx is seeing the same, but this doesn't suggest the company is a bad investment choice. Of course, competition from Altera is a concern, but Xilinx is focusing on product innovation and expects its new products to gain traction going forward. As such, investors should consider capitalizing on Xilinx's recent drop, as the company looks good for the long run.