Analog Devices is a leading supplier of analog and DSP integrated
circuits. Its fourth quarter earnings were above the Zacks
Consensus Estimate by a penny and guidance was also encouraging.
Though we remain concerned about competitive pressures across
several markets, ADI is solidly positioned in secular growth
markets and its products continue to see very strong deployment in
the emerging automotive market. Given this backdrop, the order
momentum in the last quarter is encouraging. We therefore reiterate
our Neutral rating on the shares.
Analog Devices, Inc. (ADI) is headquartered in Norwood,
Massachusetts. The company is an original equipment manufacturer of
semiconductor devices, specifically, analog, mixed signal and
digital signal processing (DSP) integrated circuits.
Semiconductor devices are broadly divided into three categories
analog, digital and radio frequency (RF). Analog semiconductors
condition and regulate real world information such as light,
temperature, speed, pressure, power and electrical currents.
Digital logic semiconductors process information in only two
states. Mixed-signal semiconductors combine both analog and digital
technology into a single device. Typically, an analog sensor
samples real world information, and then converts the input into an
electronic analog signal, which is converted into a digital format
for further digital processing. The analog and mixed-signal markets
tend to be more varied and specialized, with customized products
that have longer life cycles than the digital industry segment.
There is an ongoing drive to decrease the number of discrete
devices, lessen power requirements and shrink the size of the
existing devices, which correspondingly increase performance and
reliability. Consequently, a greater amount of functionality is
being consolidated into increasingly smaller devices.
The product line is composed of amplifiers and comparators
analog to digital converters digital to analog converters video
encoders and decoders embedded processing products and DSPs MEMS
and temperature sensors RF/IF components such as detectors,
mixers/multipliers, modulators/demodulators, switches, transceivers
and converters power and thermal management ICs, audio/video
converters, amplifiers, CODECs, filters and processors analog,
digital and RF switches and multiplexers analog microcontrollers
clock and timing products voltage references interface products
such as isolators, translators and transceivers wireless products
such as baseband processing, cellular terminal chipsets, modulators
and converters broadband products including amplifiers, CODECs,
chipsets, splitters, clock and data recovery/retiming products and
digital crosspoint switches fiber optic products including clock
and data recovery/retiming products and laser drivers and
In fiscal 2013, the company generated $2.6 billion in revenue,
which was derived from four end markets Industrial, Communications,
Consumer and Automotive. All businesses except automotive and
communications markets declined in 2013. The automotive market saw
strong growth for the fourth straight year.
Analog Devices has manufacturing facilities in Massachusetts
(California), Ireland and the Philippines. The company also uses
outside foundries, mainly Taiwan Semiconductor Manufacturing
Company for front-end processing and third party subcontractors for
back-end operations. It sells its products with the help of a huge
direct sales force and sales offices spread across 17 countries
including the U.S., as well as third party distributors,
independent sales representatives and through the company
The Americas and Europe were the largest served markets in 2013.
The U.S. was the largest region within the Americas, with a 35%
revenue share. Other countries in the Americas accounted for
another 4%. Europe contributed 32% of total revenue (down 1.4% from
2012), China 13% (up 2.5%), Japan 11% (down 12.2%) and the rest of
Asia 9% (down 4.4%).
Analog Devices has a very large number of competitors, given the
attractive markets in which it operates. These competitors range
from pure analog players, such as Intersil Corporation, Linear
Technology, Maxim Integrated Products and National Semiconductor to
more diversified players, such as Texas Instruments and ST
Analog Devices Inc. (ADI): Read the Full Research
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