Tags: Analog | chips | economy | ADI

Analog Devices: Chips Clipped by Economy

By    |   Tuesday, 11 Oct 2011 01:04 PM

Analog Devices (ADI) is one of the world's biggest analog chip manufacturers, boasting an impressive array of products. But the sluggish economy appears to have clipped the wings of the entire industry, so it might be worth the wait for a bigger correction.

As the name suggests, analog chips are the company’s specialty. It also makes mixed signal and digital signal processing chips. Analog is the market leader in converter chips, which are used to convert analog signals to digital and back, according to Morningstar research.

The company has more than 60,000 customers, a majority of them in industrial and auto markets. Analog Devices chips also have a major presence in wireless base stations. That position in wireless infrastructure should serve the company well as advanced mobile networks continue to roll out.

Analog Devices profit climbed 10 percent to $219.9 million in the quarter ended July 30 from $199.5 million a year earlier. Revenue gained 5 percent to $758 million.

Standard & Poor’s analyst Clyde Montevirgen has a hold rating on Analog Devices shares. That rating is based on the stock’s valuation and his estimate of fair growth.

Industry weakness

“The company has done a good job with design wins for higher-margin products and markets, which could support relatively healthy sales for years to come,” Montevirgen writes. “With its profitable business model, ADI can continue to post above-industry operating margins and return on equity.”

On the downside, however, “we think that ADI and the broader semiconductor industry will experience weak demand over the near term, which along with anticipated lower plant utilization could lead to below-industry earnings growth,” the analyst says.

“All told, we believe ADI's multiples should be around the industry average.” The company next reports around Dec. 21.

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Analog Devices (ADI) is one of the world's biggest analog chip manufacturers, boasting an impressive array of products. But the sluggish economy appears to have clipped the wings of the entire industry, so it might be worth the wait for a bigger correction. As the name...
Analog,chips,economy,ADI
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2011-04-11
Tuesday, 11 Oct 2011 01:04 PM
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