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Analog Devices' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Continuing inventory reduction by both our customers and distributors in November and December, coupled with lower capital spending by many of our customers, reduced orders on ADI and that continued the trend that began about 6 or 9 months ago. Nevertheless and happily, order rates and orders began accelerating in January and have continued strong into February, which leads us to believe that our first quarter may represent the sales gross margin and operating margin trough of this cycle for ADI. And we expect to resume growth in our second quarter, which began in early February.

We believe that customer and distributor inventories are reaching levels commensurate with the now revised outlooks and many of our larger customers have become marginally more optimistic and are beginning to free up some of their capital budgets. I'll provide a few more specifics on the short-term outlook towards the end of the call.

In the first quarter, our sales, into virtually every end market except automotive, declined sequentially and year-over-year. In the first quarter, automotive sales actually increased 6% sequentially and 26% year-over-year as ADI continued to benefit from increased ADI dollar content per vehicle and increased vehicle unit sales worldwide. We would expect that our automotive sales to remain strong in our second quarter.

Industrial revenues declined 8% sequentially in Q1 for the third consecutive quarter of declines. The decline was very broad-based across customer tiers and geographies and of course industrial automation, energy instrumentation and health care applications. As has been the case now for several quarters, order rates from industrial customers appear to be well below consumption rates for our products for the first 2 months of our first quarter, but have recently been showing some good signs of improvement, which of course is very welcome news for us, since the industrial market represented 45% of our revenues in Q1 and remains our highest margin business. Based on these trends, we expect that industrial revenues will increase in the second quarter after now 3 quarters of sequential decline.

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