When you're swimming against the stream and still making good headway, you know you're doing something right. That's how Analog Devices
Analog CEO Jerald Fishman noted that the product mix he is pushing out at the moment contains more of the low-margin chips that go into cars and consumer products, and comparatively fewer high-margin industrial parts. Even so, the company collected gross margins of 56.3%, or 220 basis points above the previous quarter.
That might sound like an impossible trick, performed with smoke and mirrors, but margins tend to expand when a chip maker's order flows pick up steam. Unlike fabless chip designers like NVIDIA
Ripping a page from rival Texas Instruments
And ADI's sales did flow freely in the fourth quarter, to the tune of $572 million or a 16% sequential increase. The two-punch combo of higher sales and wider margins trickled down to the bottom line, where earnings per share expanded from $0.22 last quarter to $0.36 this time.
Analog has a growing backlog of orders, and Fishman sees margins growing again in the next quarter. Industrial sales should improve, but the "cash for clunkers" program is over, so the likes of Ford
This is a fine example of steady execution through difficult as well as easier environments. Can you think of a steadier hand in the chip sector than Mr. Fishman's? Let me know in the comments below.