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Technology Stocks : ADI: The SHARCs are circling! -- Ignore unavailable to you. Want to Upgrade?

To: Meghan Richards who wrote (874)	3/29/1998 12:46:00 AM
From: Tom Caruthers	Read Replies (1) \| Respond to of 2882

Meghan, Something to perhaps alay your fears about the sale... Tom Electronic Buyers' News March 30, 1998 ADI sells ASIC technology by Ismini Scouras Analog Devices Inc. finally freed itself from its unprofitable hard disk drive IC business last week when it sold its read channel ASIC technology to Adaptec Inc. for $34 million, plus R&D services payments and royalties. The deal sharpens ADI's strategy concerning its core analog ICs and DSP products business. "What this allows us to do is basically free up R&D sources to be applied in the area of analog IC and DSP-related ICs, where we believe our correct focus is," an ADI spokesman said. ADI, Norwood, Mass., should have been out of the business a long time ago, said Nimal Vallipuram, an analyst at Bear Stearns & Co. Inc., New York. The company has almost no market share against leading supplier Texas Instruments Inc., Dallas, he said. "It was impacting their bottom line, especially for the last nine months or so," Vallipuram said. "Since it didn't have a large market share, and the disk drive companies were not doing well, it was not a good situation to be in." ADI generated little sales from the storage market in its first fiscal 1998 quarter, said Shekhar Wadekar, an analyst at Raymond James, St. Petersburg, Fla. "I would estimate about half a million, tops." But instead of incurring losses, ADI will receive $6 million for research and development services during a transition period lasting 12 to 18 months, and will gain up to $20 million in royalties based on sales by Adaptec that integrate ADI's read channel ASIC technology. For Adaptec, the deal strengthens its ASIC product offering to the storage market. Adaptec already has the controller, DSP, and servo cores, a spokesman said. "This gives us the full package of ASICs that constitute the brains of storage devices today," an Adaptec spokesman said. Despite current market conditions, the company said that it needed to beef up its storage-IC business in order to respond to expected improvements in the market. In Adaptec's third fiscal 1998 quarter ended Dec. 31, the com-pany reported an 8% sequential decline in sales, which reached $254 million, partly due to decreased IC sales to disk drive customers, according to a Bear Stearns report.

To: Meghan Richards who wrote (874)	3/29/1998 1:13:00 AM
From: Tom Caruthers	Read Replies (1) \| Respond to of 2882

Meghan, Another article dated 2/23/98 from Electronic Buyers' News: Based on these articles, the sale to Adaptec is clearly a positive. It streamlines the company....I'm very impressed by the areas that ADI seems to be focusing on....much more consumer oriented than before. They are in the digital camera market, modems, game peripherals, etc. Tom C. ADI braked by excess inventory By: Ismini Scouras Results included an $8 million write-off as one GSM customer found itself squeezed by Asian woes and was forced to default on its payments, the company said. While overall conditions in the wireless market appear to be relatively healthy, ADI's major GSM-handset customers, including Siemens AG and Philips Electronics N.V., are rapidly losing market share to Ericsson Telecom and Nokia, analysts said. Siemens' handset business is also vulnerable in Asia, they added. "The basic analog business is doing just fine," said analyst Mark FitzGerald, of UBS Securities Equity Research, San Francisco. But strength in ADI's analog-IC business, which accounted for approximately 75% of company sales, was offset by poor performance within some of its system-level IC business, including GSM, disk drives, and micromachining devices, FitzGerald said. Market conditions should see no further erosion, according to other analysts, who added that ADI has probably bottomed out. Still, ADI hinted in a conference call last week that it might "restructure or exit" the hard drive IC business, which has been at depressed levels, said Krishna Shankar, an analyst at DLJ Securities, San Francisco. Excess inventory in the GSM wireless-handset business and weak demand for hard drive ICs sliced into Analog Devices Inc.'s revenue and net income growth in its first fiscal quarter ended Jan. 31, the company said last week. ADI's revenue increased 13.2%, to $330.7 million, compared with $292.1 million in the same quarter a year ago, but was flat sequentially. Net income also showed a gain year-over-year, rising 13% to $44.2 million from $39.2 million, but fell 13.1% from the previous quarter, when net income reached $51 million. The company could not be reached for comment. "Clearly, it's a good news/bad news story," said Drew Peck, an analyst at Cowen & Co., Boston. "The GSM phoneset business for them and everyone else has been weak. Therefore, that has put some pressure on revenue and earnings during the quarter. On the other hand, that was heavily offset by what appears to be continued booming demand for analog components." ADI's sales are expected to rise 5% to 7% sequentially as its analog and DSP businesses "strengthen during the second quarter," said Jerald Fishman, president and chief executive, in a statement. "I believe that's going to be better than the average for most other semiconductor businesses, because the analog business seems so unsually strong right now relative to where memory and logic is," Peck said.