Analog Devices Latest Victim of Semiconductor Overcapacity
Analog Devices (ADI) became the latest casualty of the ongoing semiconductor capacity glut. According to its press release:
Analog Devices, Inc. announced today that it estimates revenue for the fourth quarter of fiscal year 2006, ending October 28, 2006, will be approximately $640 to $645 million, which is approximately 3% below the third quarter of fiscal 2006 revenue of $663.7 million. The Company’s previous outlook for fourth quarter revenue was announced on August 10, 2006, and at that time, ADI estimated fourth quarter revenue would be approximately flat compared to the third quarter of fiscal 2006.
The sequential decline in revenue for the fourth quarter, as compared to the third quarter of fiscal 2006, is primarily due to a decline in revenue from cellular handset customers. ADI believes that during the fourth quarter these customers depleted inventory they had accumulated during the immediately prior quarter.
It is important to remember that not too long ago wireless was the invincible growth driver for semiconductors. But while strong market segments can keep things going for a while, ultimately capacity is capacity and too much of it hurts everyone in the industry. That is a lesson to keep in mind if you believe success is a product of technology and applications or one capacity expansion won’t snowball into a glut.
Disclosure: William Trent has a long position in SMH.
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