SAN FRANCISCO—Executives from Analog Devices Inc. (ADI) said Tuesday (Nov. 27) that the company's manufacturing capacity utilization rate has fallen to its lowest level since 2009 as cautious customers continue to reduce inventories amid macroeconomic sluggishness.
Jerald Fishman, ADI's CEO, told analysts following the company's fiscal fourth quarter financial report that the company began cutting capacity utilization during the quarter and plans to continue doing so in the current quarter. The company plans to cut capacity utilization to just over 50 percent, down from 67 percent last quarter, in order to avoid inventory buildup, Fishman said.
"While operating our factories well below capacity will certainly reduce our gross margins in the short term, it will provide significant upside leverage—as it has in the past—when revenue growth resumes," Fishman said.
ADI reported mixed results for the quarter—which closed Nov. 3—with sales largely below analysts' expectations. The company also provided a sales target for the current quarter that came up short of analysts' forecasts.
CJ Muse, an analyst with Barclays Capital Inc., said ADI's move to cut capacity utilization to stave off inventory build would position the company for a snapback in gross margins once demand recovers. ADI's gross margins fell to 62 percent in the fiscal fourth quarter, lower than consensus analysts' expectations of about 65 percent.
"We have been highlighting that while downstream tech inventories remain lean, semis inventory levels in general remain at more elevated levels," Muse said, in a note to clients circulated Wednesday.
Barclays maintains a rating of "equal rate" (equivalent to "hold") and a price target of $40 on ADI's stock. ADI's stock traded at just over $40 in afternoon trading Wednesday, down slightly from Tuesday's closing price.
General purpose voltage references, quad op-amps, and quad comparators are almost as cheap as dirt. Is it possible that a microcontroller plus software could compete economically?
The techniques that are used to great advantage to integrate much digital functionality work far less well when attempting to integrate analog technology. Exciting new research opens the door to new ways of integrating analog building blocks for optimum performance.
As technology evolves, the definition of "programmable" analog/mixed-signal ICs has evolved as well; most users find the change to be a very good thing, despite any limitations it may impose.
Design engineers design and build things as part of product development. Sometimes, it's better to buy a subsystem already fabricated -- but which subsystem and when?
To save this item to your list of favorite Planet Analog content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This
CJ Muse, an analyst with Barclays Capital Inc., said ADI's move to cut capacity utilization to stave off inventory build would position the company for a snapback in gross margins once demand recovers. ADI's gross margins fell to 62 percent in the fiscal fourth quarter, lower than consensus analysts' expectations of about 65 percent. 
