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Analog Devices drops on lowered expectations

The company meets analyst estimates but reduces its financial targets for its second quarter and full year.

    Shares of Analog Devices dipped Friday after the company met lowered expectations but also reduced its financial targets for its current quarter and the full year.

    The company's stock closed down $2.01, or 4 percent, at $49.50. Analog Devices makes digital signal processors, the chips used in cell phones, digital cameras and other handheld gadgets.

    On Thursday, Analog Devices reported fiscal first-quarter earnings of $190.2 million, or 50 cents per share, on revenue of $772 million. A consensus of analysts had predicted a profit of 50 cents per share on revenue of $773.8 million, according to First Call.

    Revenue was below the company's own lowered forecast; last month Analog Devices predicted first-quarter sales of $775 million.

    As for the current quarter, the company said it now expects earnings of 43 cents to 44 cents per share, on revenue of $710 million to $725 million. Analog Devices sees a 2001 profit of $1.85 to $1.90 per share.

    Analyst consensus was predicting profits of 49 cents per share for the quarter ending in April and $2.02 per share for the full year, according to First Call.

    Considering the rash of warnings from companies in the technology and communications sectors, Analog Devices' forecast could have been much worse, analysts said. And on Friday, ABN AMRO upgraded the stock from "add" to "buy."

    "The guidance was not dramatically bad, compared to others," said John Geraghty, an analyst with Gerard Klauer Mattison. "It was better than I expected."

    Eric Ross, analyst with Thomas Weisel Partners, agreed. "It's just a two-quarter slowdown, and then it's back to the races," he said.

    During a Thursday conference call with analysts, Analog Devices executives said customers are pointing to a rebound in the second half of the year.

    The company couldn't have done much to avoid a slump, analysts said.

    "It's not simply ADI, it's the industry," said Cody Acree, analyst with Frost Securities, who has a "strong buy" rating on the stock. "I think ADI is handling it better than most."