Analog Devices' industrial business, which accounts for 47 percent of its revenue, was stable during the quarter after showing strong growth in Q2. Its industrial customers and distributors do not see much deterioration in their business for the rest of the year. In the industrial sector, energy is currently doing well.
The company's communication business grew 9 percent from Q2. It has seen much stronger growth on the wireless side of the business than the wired side. There are signs of spending in America and Asia in building out 3G networks. The TD-LTE systems are starting to be deployed in China as well. As 4G systems build out, the company's revenue in communications should grow.
Automotive revenue, which is about 17 percent of the company's revenue, increased 12 percent from Q3/2011, but declined slightly from Q2/2012. Revenues fell short because European manufacturers reduced production during the summer due to the uncertainty in Europe and soft car sales there. Analog Devices expects opportunities for it to grow in the auto market for rollover control, radar-based collision avoidance, energy efficiency and infotainment.
Analog Devices expects its revenue for its industrial, communications and automotive businesses in Q4 to be flat with Q3.
The consumer products business was flat from Q2/2012. Portable media grew, but digital cameras declined. ADI's backlog for consumer products grew during the quarter, which means there should be good revenue growth in Q4. Consumer products are still a relatively small part of the company's sales. There are 3 segments in the consumer business: digital imaging, portable space, and home entertainment. Analog Devices expects a lift in all 3 segments during Q4, which is historically a strong period for its consumer products.
Analog Device's book to bill was greater than 1 during Q3. An increasing amount of its sales come from orders that are booked and shipped during the same quarter, which often happens in uncertain environments. It expects revenues to be determined mostly by the economy and only by new product cycles to a lesser degree.
Utilization was slightly more than 70 percent in Q3. Analog Devices expects utilization to be the high 60s for Q4. Utilization is a big factor in driving gross margins. When utilization was over 80 percent, Analog Devices' margins were around 67 percent.
Financials.
Revenues declined by 10 percent from Q3/2011.
Gross margin was 65.6 percent, an increase of 40 basis points from Q2/2012. If most of the sales in Q4 are comsumer products, gross margins will likely be around 65 percent.
Diluted earnings per share was $.56. Analog Devices expects EPS in Q4 to be between $.54 and $.60 in Q4.
Inventory increased by 3 percent. Analog Devices has about 121 days of inventory on hand. It expects business to catch up to its normal 100 to 110 days of inventory by Q1/2013.
Analog Devices will pay a $.30 cash dividend to shareholders of record on August 31, 2012. The company has $580 million remaining under its share repurchase program.
The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/821011-analog-devices-management-discusses-q3-2012-results-earnings-call-transcript?part=single
Copyright 2012 Jaygo's Earnings Conference Call Summaries
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
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