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Analog Devices Management Discusses Q2 2012 Results - Earnings Call Transcript

The industrial end markets, which are typically seasonally strong for ADI in the second quarter turned even better performance than we had planned and grew about 12% sequential. All of the major application areas within industrial grew sequentially, and it was led by over 20% sequential growth in both instrumentation and in energy.

Health care and industrial automation, which includes process control, as well as defense, aerospace and security, also grew sequentially in the second quarter.

In general, indications in the industrial market are that customers have stopped depleting inventory and our current orders more closely matched consumption levels, certainly much more closely than had been the case over the last few quarters.

In the industrial market, ADI is well recognized as the best brand amongst the wide range of industrial applications, and many of these applications we now believe have the potential for above market growth rates in the future.

Revenues also increased sequentially from communications infrastructure customers, as both wired and wireless applications grew about 3% sequentially. Communications order rates began very slowly in the early parts of Q2, but improved significantly toward the end of the quarter.

For the past few quarters, operators have worked to increase capacity at minimal cost by implementing software upgrades rather than hardware upgrades. But to date, networks in many regions of the world are very much overloaded, and operators find it difficult to respond to significantly higher bandwidth requirements from applications, such as streaming video by using existing equipment. As a result of new equipment upgrade cycles, ADI's leading technology portfolio and very strong customer relationships with the largest market shareholders in the infrastructure market, we expect our sales into communications applications to grow throughout the second half of our fiscal year and also into 2013.

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