After reporting solid financial results for the fiscal second quarter and predicting further revenue and profit gains in the months ahead, Analog Devices Inc. seems to have reached the bottom of a financial downswing that last year had the chip maker mulling a companywide restructuring."Last year was a bad year, so they were talking about making some major changes, particularly divesting some businesses that were performing very poorly," said Mark Grossman, an analyst with SG Cowen Securities Corp., Boston.
In November, the company had been reviewing its DSP and analog-chip strategies. Analysts at the time suggested that Analog's cell-phone chipset, modem, and micromachining businesses were potential restructuring targets.
Now, with market conditions improving and the company's sales outlook more favorable, it seems unlikely that Analog will need to make any substantial restructuring moves, Grossman said.
In fact, Analog, Norwood, Mass., beat Wall Street's earnings expectations for the most recent quarter, posting profits of 25 cents per diluted share, excluding a $5.1 million one-time in-process R&D charge associated with the acquisition of two DSP tools companies.
In February, Analog acquired White Mountain DSP Inc. of Nashua, N.H., and agreed to acquire Edinburgh Portable Compilers of Edinburgh, Scotland.
Analysts polled by First Call Corp. had expected earnings of 23 cents per share, which would have been flat with the company's fiscal second quarter last year. Analog toted up revenue of $340 million, up 6% percent from $319 million a year ago and 13% sequentially.
Jerald G. Fishman, Analog's president and chief executive, attributed the most recent quarter's positive results in part to stronger sales to the communications and computer markets.
"We also saw a resumption in demand among industrial customers, aided by an increase in sales to ATE [automatic test equipment] customers," Fishman said in a release. "We believe that our market shares in high-performance analog-IC product categories increased during the second quarter in every major product category."
The company's analog-IC sales during the quarter grew 14% sequentially, while revenue from DSP products rose 9% from the first quarter-a year-over-year increase of 44%, Analog reported.
Looking ahead, Fishman said that, based on the strength of the company's incoming orders, Analog could achieve sequential revenue growth of up to 8%, and if current trends continue, that growth could continue into the company's fiscal fourth quarter.
But the rosy financial picture executives have painted for the company in the coming months is not unique to Analog, some industry observers have noted.
"The whole analog business is strong," Grossman said. "Just about every analog company reported good numbers and orders that are growing pretty strongly. The outlook is improved for almost all of them."