NORWOOD, Mass.--Analog Devices Inc. today slashed its estimates for the company's second fiscal quarter, predicting a 20-to-22% sequential drop in revenues from the prior three-month period due to slowing chip orders.
The Norwood chip company also warned that the slump is expected to continue through its third fiscal quarter, with sales now estimated to be 5% lower in that period compared to the second fiscal quarter, which ends May 5. The supplier of analog chips and digital signal processors said its current outlook suggests that the fiscal third quarter could be the low point in the current downturn with a modest sequential increase in sales occurring in the final period of its fiscal year.
Analog Devices said its second quarter revenues would total $600-to-620 million, compared to $772 million in the Q1 period, ended Feb. 3. Previously, the company was forecasting a 6-to-8% sequential drop in sales during the current fiscal quarter (see Feb. 15 story).
"Most of these reductions are the result of substantial decreases in shipments to large North American telecommunications OEMs, wireless infrastructure OEMs, and ATE automatic test equipment suppliers in the U.S. and Japan," said Jerry Fishman, president and CEO of Analog Devices. "Our distribution sell-through, which represents tens of thousands of end customers worldwide, is expected to be approximately flat to last quarter, following a sequential decline in the first quarter."
"We believe our shipments to OEM customers are running below their consumption levels, which is bringing down their inventories," he said. "We are also encouraged by the trend in our distributors' shipments to their customers, which appear to have stabilized following the decline we saw last quarter."
However, Analog Devices remains cautious about the rest of the year, said the chief executive. "We currently believe that third-quarter revenues could be approximately 5% below those for the second quarter. We also believe that the third quarter could be our trough quarter, with revenues showing modest sequential growth in the fourth quarter," he added.
Analog Devices is estimating a second fiscal quarter operating margin of about 25% of sales and a pro forma earnings of $0.31-to-0.33 per share. In the prior fiscal quarter, the company posted earnings of $0.50 per share. Until today, Wall Street's consensus for Analog Devices earnings in the quarter was $0.41 per share, based on a survey of analysts by First Call/Thomson Financial.
Results for Analog Devices' second fiscal quarter will be posted May 17.
