Analog Devices Marginalized Again: Fool by Numbers

On Nov. 27, chip designer Analog Devices (NYSE: ADI  ) released fourth-quarter earnings for the period ended Nov. 3.

• The margin misery continues, as every conceivable profit proportion slides southward yet again. Growing cash flows make up for some of the damage, though.
• The company continues to use cash for share buybacks. The three-year-old repurchase plan has $665 million of authorized buybacks remaining, out of the original $3.3 billion authorization.
• The report is full of unusual metrics that help investors examine the results from different angles. Curiously enough, some bog-standard figures are missing, including accounts payable and short-term debt.

(Figures in millions, except per-share data)

Income Statement Highlights

	Q4 2007	Q4 2006	Change
Sales	$648	$610	6.4%
Net Profit	$97.9	$138	(29.3%)
EPS	$0.31	$0.39	(20.5%)
Diluted Shares	313.8	357.2	(12.1%)

Get back to basics with the income statement.

Margin Checkup

	Q4 2007	Q4 2006	Change*
Gross Margin	58.4%	59.6%	(1.2)
Operating Margin	18.7%	20.2%	(1.5)
Net Margin	15.1%	22.7%	(7.6)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q4 2007	Q4 2006	Change
Cash + ST Invest.	$1,081	$2,128	(49.2%)
Accounts Rec.	$336	$306	10.0%
Inventory	$348	$363	(4.3%)

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q4 2007	Q4 2006	Change
Cash From Ops.	$183	$167	9.7%
Capital Expenditures	$33.2	$41.8	(20.5%)
Free Cash Flow	$150	$125	19.8%
Owner Earnings	$102	$139	(26.3%)

Free cash flow is a Fool's best friend.

Competitive Context

	Market Cap	Trailing P/E Ratio	CAPS Rating
Texas Instruments (NYSE:TXN)	$44,350	18.2	****
Broadcom (NASDAQ:BRCM)	$15,070	96.5	***
Analog Devices	$10,340	21.2	***
Linear Technology (NASDAQ:LLTC)	$6,820	21.6	****
National Semiconductor (NYSE:NSM)	$6,070	21.5	****

Using the latest reported numbers from Capital IQ, a division of Standard & Poor's.

Keep your partners close and the competition in your vest pocket.

Related Foolishness:

• Deep Discount on Texas Instruments
• Invest Like a Pro
• The Revelation That Shocked the Investment World
• Foolish Fundamentals: The Balance Sheet