Aug 17, 2001
Revenues were 32% below the prior year's third quarter and 20% below the immediately prior quarter. Pro forma earnings per share were 17 cents, compared to 43 cents reported for the year-ago quarter and 31 cents for the second quarter of fiscal 2001. The EPS figure matched the consensus forecast of analysts, according to First Call/Thomson.
The quarter's diluted earnings per share under generally accepted accounting principles (GAAP) were 10 cents.
"Our third-quarter revenues and earnings per share were in line with the revised guidance we communicated on July 19," said Jerald Fishman, president and CEO, in a released statement.
"Our analog product revenues, which accounted for more than 80% of the quarter's total revenues, declined 17% sequentially and are now 33% below the peak they reached in the first fiscal quarter of this year.
"Even so, we now expect that analog product revenues for the year will total just a few percentage points below last year's total. While this would clearly be aided by strong sales early in the year, we believe it would represent a strong performance, given that the semiconductor industry's total revenues could decline 30% or more this year.
"Our DSP revenues declined 32% sequentially in the third quarter and are now 62% below their peak. We expect that our DSP revenues could decline 33% for the year after growing over 100%last year. Our DSP product revenues have been particularly hard hit by the communications industry's widely reported woes.
"Revenues from OEM customers and from distribution customers both declined 20% sequentially," he continued. "Revenues from distribution are now down 30% from the peak, while OEM revenues are nearly 50% below their peak."
Commenting on Analog's third-quarter financial performance, Fishman said, "At 52.9% of sales, our gross margin ratio for the third quarter remained strong, despite reserving $23 million of inventory, a lower utilization rate in our internal wafer fabs and an increase in depreciation as a percentage of sales.
"This strong gross margin performance in the face of declining revenues resulted from the actions we've taken over the past six months to reduce manufacturing costs, including scheduled shutdowns among our manu facturing operations worldwide and reductions in workforce in many manufacturing locations. This effort was aided by the outsourcing of our most volatile products. "
Regarding the near term, Fishman said, "While this market makes it difficult to offer precise near-term guidance, there are signs we're approaching this cycle's trough. Our backlog cancellation rate has clearly abated, and our backlog now appears to be much more representative of real demand compared to what we've seen over the past several quarters. Also, orders for shipment within the quarter increased sequentially in the third quarter. Finally, we believe that current order rates for our products are below current consumption rates.
"Although visibility remains poor, our revenue plan for the fourth quarter remains unchanged from the guidance we offered in our July 19th third-quarter update. We still expect a 5 to 10% sequential decline in revenues to about $440 million. At this revenue level, we would expect a very modest sequential decline in our gross margin ratio to about 51 or 52% of sales.
"We believe operating expenses could again decline sequentially in the fourth quarter. This could result in a fourth-quarter operating margin of approximately 13 to 14% of sales and earnings per share in the range of $0.12 to $0.14."
Consensus forecast of analysts was 14 cents, according to First Call/Thomson.
