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Analog Devices falls on warning

Share prices drop after the firm announces that both sales and earnings for the third quarter could be significantly down.

    Analog Devices shares fell more than 12 percent today after the company announced that sales for its fiscal third quarter, which ends August 1, could be approximately 10 percent below the previous quarter, significantly lowering earnings.

    Analog Devices attributed the decline to slow sales in Asia and generally poor market conditions in the semiconductor industry.

    The company's stock has traded as high as $39.63 and as low as $22 during the past 52-weeks.

    The company said it expects earnings to be down by a larger percentage than sales. The analysts' consensus is that Analog Devices will earn 27 cents per share, according to First Call.

    "I think their earnings will come down to somewhere between 20 cents and 22 cents," said Chris Chaney, an analyst at the investment banking firm A.G. Edwards. "The whole capital equipment industry is going through a major downturn right now, and [Analog Devices] is seeing a major part of that."

    Analog Devices cited as specific reasons for the anticipated revenue shortfall the dramatic downturn in the automatic test equipment market caused by the overall decline in the semiconductor market, weak demand in the distribution channel and the depressed business environments in both Southeast Asia and Japan.

    Despite the continued downturn, Jerald G. Fishman, Analog Devices president and chief executive said the company has is positioned to "substantially improve [its] performance as the semiconductor market recovers." He added that new, large opportunities in the third quarter of fiscal 1998, "could be the trough of the current semiconductor cycle for Analog Devices.'' The company could not be reached for comments for specific information on these opportunities.

    Analog Devices expects to announce its third-quarter results on August 19.