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.
Every now and then something new comes along that causes you to want to dig down and find out a little more information. Tearing my attention away from Caitlin Jenner for a moment, I thought I'd take a closer look at the remarkable Solar Impulse 2 – an airplane powered solely by solar energy.
When analog engineers get together, the discussion always turns technical with a touch of fun. Laptops open up, schematics are surveyed and discussed, good hearty laughter abounds, and fond reminiscing of analog icons no longer with us brings out old stories and some good memories.
It might seem counterintuitive that an active device solution consumes less power than a passive device. Every design engineer knows that a passive crystal resonator (XTAL) doesn’t draw power, so why use an oscillator in place of an XTAL in a power sensitive application? The answer becomes clear when total system power is considered.