It was the best of times, it was the worst of times. It was the age of wisdom, it was the age of Foolishness. As the analog chip sector crawled out from under the rubble of a collapsed market, it was time to compare and contrast, and to find the best investment opportunities.
And that, my friend, is where you come in.
To be precise, Analog saw revenue rise 4% from last quarter, landing at $492 million. Earnings jumped farther and faster, increasing 22% sequentially to $0.22 per share.
But Analog is having trouble in the margin -- the gross margin, that is. That metric shrank by 100 basis points from last quarter, moving from 55.1% to 54.1%. High-margin industrial and telecom customers have relaxed their ordering activities lately, while less profitable consumer-products customers picked up the slack. The bottom-line improvement in the face of such shrinkage points to strong cost controls on the operational level. Those trimmed corners and tightened bolts should serve Analog well in the future, as a leaner and meaner company takes on refreshed opportunities.
Gross margins greater than 50% are still pretty nice; Texas Instruments and STMicroelectronics
The average million-dollar order for Analog brings in $541,000 to fuel operations and filter down to the bottom line. Linear is doing about 40% better than that. Strong margins show pricing power, which means that customers see something extra -- something better -- in Linear's products. Linear (like Analog) is perceived by many as a defensive play thanks to its relative stability and industrial exposure. As news of an economic recovery gained momentum, investors piled into lower-quality companies, but I think you’d be mistaken to ignore these analog technology giants -- especially Linear, with its focus on feature-rich, high-margin items and strong performance during the economic doldrums.
That pricing power is one of the reasons why Tom Gardner recommended Linear to his Motley Fool Stock Advisor subscribers last year. He had plenty of reasons to love that stock, and they still hold true today. Find out exactly what Tom saw with a free 30-day trial pass to our flagship newsletter service.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.