Tags: Linear | stable | volatile | LLTC

Linear Technology Stable in Volatile Market

By    |   Friday, 21 Oct 2011 10:47 AM

Semiconductor stocks are notoriously volatile, roiled by economic ups and downs. But within that world, analog chip companies are blessed with more stable cash flows and steadier businesses. Why? Analog chips are essential ingredients used to transmit information in an increasingly digitized world. So, sales have grown rapidly.

Take analog chip maker Linear Technology Corp. (LLTC). Originally, the company served industrial customers, especially the military. But for the past few decades, the chip maker has expanded into communications, computer and automotive niches. As a result, Linear Technology has grown its sales at an above-industry pace by serving a broader market, note S&P analysts.

Linear Technology is not immune to market cycles. CEO Lothar Maier noted that booking demand declined at the end of the fourth quarter due to economic sluggishness. “Short-term, we are cautious and anticipate some headwinds,” he added.

In the most recent quarter ending Oct. 2, LLTC posted a profit of $108.4 million, 47 cents per share, down 21 percent from $137.3 million, 59 cents per share, in the same period last year. Revenue fell 15 percent to $329.9 million.

Higher profitability and a health cash flow, however, can give Linear Technology a leg up. For example, revenue for fiscal 2011 shot up 27 percent to $1.48 billion, versus $1.17 billion a year ago. Net income soared 61 percent and the chip maker ended the year with $922.5 million in cash, plenty of money to support its 3.2 percent dividend.

Divided view

Of the 22 analysts followed by Thomson/First Call, two have strong buy recommendations on Linear Technology and five have buys, with 13 holds, one underperform and one sell.

UBS analysts rate Linear Technology a buy, noting that chip makers are now cheaply valued and balance sheets are in good shape. The company reports next Jan. 18.

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Semiconductor stocks are notoriously volatile, roiled by economic ups and downs. But within that world, analog chip companies are blessed with more stable cash flows and steadier businesses. Why? Analog chips are essential ingredients used to transmit information in an...
Linear,stable,volatile,LLTC
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2011-47-21
Friday, 21 Oct 2011 10:47 AM
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