5/17 ADI ( $46 move $53) Q2 earnings meet lowered forecasts
(UPDATE: Adds CEO comments, background, share price details)
NORWOOD, Mass., May 17 (Reuters) - Analog Devices Inc. (NYSE:ADI - news), which makes semiconductors for high-speed modems, mobile phones and other electronic devices, reported on Thursday second-quarter earnings in line with lowered expectations and warned the slump would continue into the current quarter, in line with forecasts of other chipmakers.
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The company reported revenues of $601 million and pro forma earnings per share of 31 cents for the quarter ended May 5, excluding amortization expenses and other acquisition-related charges.
Analog Devices had warned in April that earnings would fall short of earlier expectations because of a slowdown in new orders and a rising number of cancellations. Analysts had forecast quarterly earnings of between 28 and 33 cents per share after that warning, according to Thomson Financial/First Call.
Revenues were down 22 percent from the prior quarter and Analog Devices forecast that sales in the current quarter could slump another 10 percent from that level before ``a modest resumption of revenue growth in the fourth quarter.''
As with many others in the semiconductor industry, Analog Devices is wary of calling the second quarter the bottom of the current down cycle in the notoriously boom-and-bust chip industry. Moreover, many high-tech customers plan to shutter factories for a week or more this summer to cut costs and this comes on top of traditionally slower summer sales.
``I think we're going to need another quarter of stability before we go out on a limb and see the bottom and say it's here,'' said President and Chief Executive Officer Jerald Fishman on a conference call to discuss the results. ``There's just too many unknowns out there.''
He added that the decline in sales of analog chips, which translate sound and other readings into digital signals and account for almost 80 percent of its sales, had been ``the most precipitous in recent memory.''
Analog chip sales were down 19 percent in the second quarter from the prior quarter as customers struggled with excess inventories, the company said.
Fishman's comments echoed those of Ned Barnholt, chief executive of test and measurement company Agilent Technologies Inc., who said on a conference call to analysts to discuss his company's results that: ``Frankly, the speed and severity of the slowdown was unlike anything I've seen in 34 years.''
It is well acknowledged that the current downturn is the worst since a slump that began in 1984, spurred by a glut of capacity for memory chips that Japanese companies had put online.
The company forecast earnings per share of 23 to 25 cents for its third quarter, at the low end of current Wall Street estimates.
Despite the broad slump, the company said that orders from personal computer makers ``showed some strength'' late in the quarter just ended.
Gross margin was 57 percent in the quarter, down from just over 58 percent in the prior period as cost controls helped to partly offset the impact of slower production and a $20 million charge for excess inventory, the company said.
Communications devices, including mobile phones, wireless base stations and broadband Internet modems, accounted for about 45 percent of Analog Device's chip sales last year and represented the fastest growing market for the company.
Asia and Europe accounted for about 55 percent of the company's sales last year.
ADI shares closed Thursday at $48.40, up 2.6 percent on the day. The stock has rallied since mid-April, but is still down about 5 percent since the start of the year, underperforming the broader semiconductor sector.
The Philadelphia Stock Exchange semiconductor index, a widely watched industry benchmark, has risen about 11 percent since the start of the year. |
