Ahead Of The Bell: Analog Shares Drop

NEW YORK (AP) — Chip designer Analog Devices Inc.'s shares declined in premarket trading Wednesday even after it posted a smaller drop in third-quarter profit than Wall Street expected.

Shares fell $1.22, or 4.5 percent, to $26 ahead of regular trading.

The Norwood, Mass. company reported a 53 percent drop in third-quarter profit late Tuesday, with company keeping tight reins on technology spending.

But earnings of 22 cents per share came in 2 cents higher than the average forecast from analysts, according to Thomson Reuters.

Sales came to $492 million, while analysts were looking for $479.6 million.

Investors appeared focused on ADI's gross margin, which came to 54.1 percent of sales, down from 55.1 percent the quarter before.

Analysts suggested the shortfall may be temporary, however. Craig Ellis, of Caris & Co., told clients in a note Wednesday the gross margin "hiccup" could present investors with a buying opportunity. He reiterated a "Buy" rating and raised his price target to $34 from $28.

In a client note, Robert W. Baird analyst Tristan Gerra said, "We would be buyers of ADI shares on any weakness following somewhat light gross margin results."