Analog Devices tops Wall Street estimates

The booming chip market leads to success for Analog

Fueled by demand for communications processors, Analog Devices topped Wall Street estimates by 5 cents (.03p) in the first quarter, issued a bullish outlook and announced a two-for-one stock split.

The company reported earnings of 50 cents (31p) a share on sales of $490m (£303m) in the first quarter. First Call estimated Analog Devices earnings to be 45 cents (27p) a share. In the first quarter a year ago, the company reported earnings of 18 cents (11p) a share on sales of $300m (£186m). It has also approved a two-for-one stock split to be distributed on March 15 to shareholders of record as of February 28.

As for the second quarter outlook, Analog Devices is bullish. The company projected second quarter sales in the $535m to $545m (£331m to £337m) range, with earnings of 55 to 57 cents (34 to 35p) a share. Current First Call estimates project earnings of 48 cents (29p) a share in the quarter.

"2000 appears to be shaping up as a great year for Analog Devices,'' said Jerald G Fishman, president and chief executive, in a statement. "Revenue growth for the year could exceed 50 percent if current trends continue."

The formula for Analog Devices' success is clear: it exists in a booming market in need of communications chips. The company also makes digital signal processors, which account for 40 percent of its sales. It added that its communications sales are being driven by demand for high-speed access to the Internet, the buildout of digital subscriber line and other broadband technology, and strong growth for wireless handsets and infrastructure.

It was reported that Analog Devices' other side of the business is also faring well. The company makes components that are used in digital VCRs, digital cameras, high-end DVD players and flat panel displays.

In the first quarter, the company's gross margins were 54.1 percent, with an operating margin of 24 percent. It said it has a strong backlog leading into the quarter and $900m (£558m) in cash. "Our large backlog has given us good visibility for the next few quarters, and we believe we can continue achieving good operating leverage on rising revenues," said Fishman.

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