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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (11584)	9/12/2003 1:08:17 PM
From: The Ox	Read Replies (1) \| Respond to of 95622

Investor's Business Daily Linear Stayed In Black Though Sales Plunged Friday September 12, 10:39 am ET By James Detar Linear Technology Corp. (NasdaqNM:LLTC - News) got slammed by the chip industry downturn in 2001. Sales plummeted from nearly $1 billion in the fiscal year ended June 2001 to just $512 million in fiscal 2002. Through it all, Linear managed to stay in the black. Now sales are starting to bounce back. Revenue in fiscal 2003, ended in June, was $607 million, up 18%. Earnings per share rose 20% to 74 cents. Founded in 1981, Linear makes analog semiconductors - chips that convert waves like light or sound into digital bits. The company grew swiftly in the 1990s by specializing in power chips, devices that regulate power in consumer and business electronics. Linear weathered the industry slump by keeping a tight control on expenses. Now the company is focused on growth. But it won't grow at the expense of profit, says Chairman and Chief Executive Robert Swanson. He shared his plans during a recent interview with IBD. IBD: What's the biggest change at Linear since you co-founded it in 1981? Swanson: Here's the thing I'm the most proud of: We've taken a technology and turned it into an outstanding business. A lot of people have a technology, but can't make it a business. From the day we went public we've never looked back. We've been profitable. I've turned the technology into a damned good business. Linear is recognized as one of the leading suppliers of power management ICs (integrated circuits). That's more than half our business. And it was more than half before the bust. IBD: How many products does Linear have? Swanson: If you look at all the variations, we have 6,000 or 7,000, maybe even 10,000 products in our price list. IBD: What are the main types of products your chips go into? Swanson: We've made an effort to balance our sales: 30% communications, 30% industrial and 30% computer, mostly PCs. We are in storage disk drives also. You will find our chips in PCs, especially portable PCs. And the other 10% of our business is autos and military gear. IBD: How does this diversity shape your strategy? Swanson: We have four major business units, and we run each like a separate business. The biggest is power chips. That's split between big power chips and a second part that includes signal change amplifiers, buffers, etc. There's a third piece we call mixed signal, which is analog-to-digital and digital-to-analog chips. Finally, about 1% of business is high-frequency RF (radio frequency) devices. IBD: Linear appointed a new president in April. How's that working out? Swanson: We appointed David Bell president. We're extremely proud of not only our consistent performance since we've gone public, but also the fact we've never had a loss. We've also built a strong management team. Dave has been with us for nine years. And frankly we groomed him for the job. I can say the same about sales and marketing and operations. We have a line of succession in that we have a young team here, with the exception of yours truly. IBD: During the recent tech downturn, what did you do to stay profitable? Swanson: We had the first layoff the company has had. The crazy boom allowed us to grow 40% in two years. We couldn't get customers to agree it was a boom. Then, of course, it busted. We faced the hard decision to trim expenses. But although sales fell 47%, our total layoff amounted to only 16% of our staff. IBD: What's your overall strategy in the power chip market? Swanson: Our strategy is to make unique products the other guys can't make. As soon as a second guy can make exactly the same product I make, my price is determined by how much my competitor can charge. IBD: Does Linear have its own chip fabrication plants? Swanson: Yes, we've had our own fab from day one of the company. There was no way we could start a company and focus on high-performance analog chips and do otherwise. The only ones that had the processes we would need were competitors like Analog Devices. IBD: Do you outsource any products to foundries? Swanson: Yes, to TSMC (Taiwan Semiconductor Manufacturing Co.). But only a small portion of our total fab needs. Our know-how comes from circuit design process and test. In some cases our know-how is not enough. Let's say we need a more advanced process like 0.25 micron, or 0.35-micron process (a manufacturing technology that produces superthin circuits). I can't go build a 0.25-micron fab. This is a case where I have to work around the digital process at TSMC. IBD: How much of your factory space are you using today? Swanson: In Camas, Wash., we have Fab 1 and Fab 2. In Fab 2, the ceiling and floors exist (but it's not operating). Fab 1 is running at 60% to 70% of capacity. If I fully equip it, I can do more sales. If I install equipment in the second fab bay, I can double capacity. The Hillview fab in Milpitas (Calif.) is running at probably 35% of capacity. I put this capacity in place when it looked like there was no end to the boom. I can increase sales pretty substantially without spending a lot of money. IBD: What's the hottest market for your products? Swanson: I refer to this as the year of the handheld product. From combination cell phones to digital still cameras to MP3 players to DVD players. And a secondary market that I would have never guessed three years ago - the automobile market.