Profit Surges at Analog Devices

Industrial and consumer demand drives results.
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Analog Devices

(ADI) - Get Report

boosted its profit in the second quarter, thanks to strong industrial and consumer market demand and a gain from the sale one of its chip businesses.

And the Norwood, Mass., chipmaker projected results for its current quarter that outpaced Wall Street estimates, sending its shares up in after-hours trading.

"Orders and backlog increased significantly during the second quarter," said CEO Jerald Fishman in a statement. "Our OEM customers and our distributors are signaling significant increases in demand for our analog and DSP products."

Shares of ADI recently rose 4.1%, or $1.42, to $36.10 in extended trading.

ADI had sales of $643.9 million during its fiscal second quarter, slightly above the midpoint of its guidance range and roughly in line with analyst estimates, which called for the company to post $644.3 million in revenue.

The company posted $145.8 million in net income, or 39 cents a share, compared with the $118 million profit, or 31 cents EPS, that ADI recorded in the year-ago period.

The results included a $13 million gain from the sale of the company's digital-signal-processor-based DSL and network processor product line, as well as a $6 million charge for restructuring and cost-of-sales expenses and a $17 million stock option expense.

Excluding these items, ADI's EPS was 41 cents. Analysts polled by Thomson First Call were expecting the company to earn 40 cents a share, excluding a 5-cent charge for restructuring and stock option expense.

The company said data converters, amplifiers and general-purpose DSP chips showed the fastest sequential growth.

Industrial end markets, including factory automation, medical instrumentation and defense electronics, grew to 41% of total revenue, while consumer markets represented 17% of sales.

Revenue from communications markets declined to 29% of overall sales, from 31% in the first quarter, as the spinoff of the company's DSL product line contributed to an expected decline in sales to networking customers.

Sales to the computer markets continued to decline, representing 12% of total revenue vs. 13% in the first quarter.

Inventory increased by about $21.6 million sequentially during the second quarter, and days cost of sales jumped to 125 days vs. 118 days in the first quarter, as ADI prepared for the planned shutdown of its California wafer facility and for planned sales growth in the current quarter.

The company said sales in the current quarter will range between $675 million and $685 million, with EPS of 38 cents to 39 cents, including a 6-cents-a-share stock option expense.

The average analyst expectation called for revenue of $664.3 million, with EPS of 43 cents, excluding stock option expenses.