Analog Devices' 2Q beats expectations

Analog Devices Inc. (NYSE: ADI) reported on Wednesday second quarter earnings before charges of $5.1 million, or 25 cents a share, two cents ahead of estimates.

The First Call Corp. consensus estimate of 17 analysts was expecting earnings of 23 cents a share for the quarter. ADI earned 22 cents a share including the acquisition-related charges. In the year-earlier period, ADI earned 23 cents a share on sales of $319 million.

Revenue for the quarter 13 percent to $340 million from the same time frame last year. The company had expected an increase between 6 percent and 8 percent for the quarter.

"Our analog IC sales grew 14 percent sequentially, due in part to continuing strength in the communications and computer markets," said CEO Jerald Fishman in a statement. "We also saw a resumption in demand among industrial customers. We believe that our market share in high-performance analog IC product categories increased during the second quarter in every major product category."

Digital signal processor sales, the bread and butter of Texas Instruments Inc. (NYSE: TXN), rose 44 percent from last year. The company added that its wireless DSP and broadband products also sold well in the quarter.

Gross margins, or revenue minus the cost of sales, rose 2.3 percent to 48.1 percent for the quarter. Operating income rose to $52.5 million, or 15.5 percent of sales.

On Tuesday, Merrill Lynch reiterated its "accumulate" rating for the near-term and held its long-term opinion at "buy." The brokerage had been expecting "upbeat news", and maintained it fiscal 1999 and 2000 estimates at $1.03 a share and $1.44, respectively, with the caveat that there may be upside to both, said Joe Osha, Merrill analyst, in a report.

Going forward, ADI expects sales to gain between 6 percent and 8 percent for the third quarter based on the strength of our incoming orders. "We also believe that at this level of revenue we can achieve good operating leverage, leading to higher earnings," said Fishman. The gains in revenue and earnings are also seen being carried into the fourth quarter.

Shares dipped 3/16 to 39 3/4 on Tuesday.