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Image: Linear Technology.

Many technology stocks have been on the defensive lately, as signs arise that the long boom in electronic devices could finally be starting to slow due to weak macroeconomic conditions. For investors in Linear Technology (NASDAQ:LLTC), the bad environment has had an impact on its sales of integrated circuits, and coming into Tuesday's fiscal second-quarter financial report, many expected that further weakness would weigh on the company.

Even though Linear Technology hasn't entirely turned things around, it did report results that showed signs of promise. Let's take a closer look at Linear Technology, and whether it's moving in the right direction.

Linear Tech looks for a bottom
Linear Technology's fiscal second-quarter results showed the pressure the company has faced from industry conditions. Revenue fell 1.5%, to $347.1 million, which was almost exactly what investors had expected to see. Net income declined 1.7%, to $121.5 million, producing earnings of $0.50 per share, which was $0.04 better than the consensus forecast among investors.

A closer look at the company shows that Linear Tech is still facing some cost-containment problems. Even though the company's revenue declined, expenses both for research and development and for general overhead both rose from year-ago levels, with gains of 7% and 2%, respectively.

That sent operating margins down nearly two full percentage points, and it took a much lower provision for income taxes resulting from the permanent extension of the R&D tax credit to keep the damage to the bottom line from being larger. The company explained that an extra week stemming from a 53-week fiscal year helped add to expenses during the quarter.

However, there are some signs of recovery. Linear Technology's industrial segment continues to struggle throughout much of the world; but the company did say that it noticed some improvement in sales to its transportation-segment customers. The industrial business is twice as big as transportation, but a boost to one portion of Linear Tech's business would be quite welcome in light of past performance.

CEO Lothar Maier tried to put a positive spin on Linear Tech's results while acknowledging the challenges. "The macroeconomic climate does not appear to have improved noticeably," Maier said, "and our largest market, Industrial, remains weak in most regions." Nevertheless, the CEO said that he believes that the inventory correction that began roughly six months ago appears to be ending, and Linear Tech is seeing signs of rising demand.

Can Linear Technology bounce back?
Despite challenges in making predictions, Maier thinks the near future could be positive. Book-to-bill ratios for the December quarter were positive, and early results from the current quarter show a pick-up in demand in both Industrial and Transportation. Because it doesn't have as much consumer exposure as some of its peers, Linear Tech isn't taking a hit from the poor conditions that competitors are facing.

Linear Technology also gave favorable guidance for the current quarter's sales. The company now believes that fiscal third-quarter revenue will rise 2% to 5% from its second-quarter results. That would imply sales of $354 million to $364 million, a range that compares favorably to current calls for about $357.7 million in quarterly revenue.

Dividend investors got good news, as the company chose to boost the company's payout by 7%, to $0.32 per share quarterly. The move marked the 24th straight year that Linear Technology has raised its dividend, putting the S&P 500 member in position to join the Dividend Aristocrats next year if it can keep its streak alive in 2017.

Linear Technology investors were happy with the company's performance, adding 5% at the market opening following the announcement. Patient investors have been rewarded for their willingness to give Linear Tech time to get its act together, and it looks like the circuit maker could be setting the stage for even better performance in the year to come.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Linear Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.