Analog Devices Inc. (ADI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


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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 amplifiers.

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 website.

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 Microelectronics.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: ADI , RF

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