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PC Demand Slows Analog Devices

The chipmaker posts a higher profit than in the year-ago period, but guidance is lower.

Slowing demand for desktop computers hurt sales at

Analog Devices

(ADI) - Get Free Report

in its fiscal first quarter, but the chipmaker edged past the Street's profit expectations.

The Norwood, Mass.-based company reported after the bell Thursday that it increased its revenue 7% from the same time last year, generating $621.3 million in sales.

ADI also bumped up its profit to $120.6 million, or 32 cents, compared with $107.4 million, or 28 cents, in the first quarter of 2005.

The results included a charge of 5 cents for restructuring and stock-option expensing.

After hours, shares of ADI were recently down 2.1% to $40.05.

On a non-GAAP basis, ADI beat the average analyst expectation of 36 cents by a penny, but fell short of the top-line expectations of $624 million, according to Thomson First Call.

Gross margins for the quarter were 58.1%, compared with 57.1% in the year-ago period.

Sales to computer customers represented about 13% of total sales during the quarter and declined year over year. "The computer market has lagged for ADI as we continue to address the market for portable products but still have an installed base of slower growing desktop products," said CEO Jerald Fishman in a statement.

The company's strongest growth came from sales to communications and industrial customers.

Orders in the first quarter were strong, particularly for analog products, which the company projected will increase 5% to 6% sequentially in the current quarter. But this strength will be offset by a sequential decline in sales of ADI's DSP chips, primarily as a result of its recent sale of its DSL ASIC and network processor business.

ADI projected second-quarter revenue between $635 million to $650 million, below the average analyst expectation of $652.7 million. ADI said second-quarter EPS would come in between 34 cents and 36 cents, including approximately 5 cents of restructuring and stock option-related expenses.

Analysts were looking for 40 cents a share, excluding charges.

Shares of ADI closed the regular session up a penny to $40.91.