Analog Devices (ADI) Bench
Download as PPTX, PDF1 like1,209 views
The document provides an analysis of Analog Devices, Inc. (ADI) conducted by Penn State Investment Association. It summarizes ADI's business operations, financial performance, growth opportunities in key markets like industrial and healthcare, and risks. It also benchmarks ADI against competitors and provides projections. The top three reasons recommended to "bench" or not invest in ADI currently are not stated.
Analog Devices (ADI) Bench
- 1. Penn State Investment AssociationInformation Technology SectorAnalog Devices, Inc.(ADI) NYSEJoe Eirkson, Katie Lally, Matt LochanskyThe Nittany Lion Fund, LLC.
- 2. Team Recommendation: BenchTop Three Reasons to Bench:
- 3. Company DescriptionAnalog Devices, Inc. is a world leader in the design, manufacture and marketing of high-performance analog, mixed-signal and digital signal processing integrated circuits (ICs) used in virtually all types of electronic equipment
- 4. New organizational structure in 2009 introduced two focus groups:
- 5. Core Products and Technologies (CPT): product focused
- 6. Strategic Market Segments (SMS): end market focused
- 7. Operates in 18 countries60,000 customers
- 8. Headquartered in Norwood, Massachusetts
- 9. Employs approximately 8,300 people
- 10. Operational business segments include: Industrial, Communication, Consumer, Automotive and ComputerCEO Jerald Fishman3
- 12. Industrial Segment GrowthIndustrial and InstrumentationHealthcareExpected 8-12% growth over 5 years
- 13. Shift in motor control technology increased demand for signal processing
- 14. Demand driven by customers’ needs for increased:
- 18. Significant growth opportunities in Asian markets—particularly China
- 19. Expected 10-14% growth over 5 years
- 20. Increased demand for imaging and patient monitoring
- 21. ADI is a market leader
- 22. Strategic partners optimistic about 2011 spending
- 23. Healthcare trends to increase demand:
- 24. Increased need for highest speed and channel count in medical imagining systems
- 25. Demand for improved measurementincrease diagnostic accuracy
- 26. Expansion of telemedicine; portability
- 27. Greater need for secure communications capabilitiesMobile Infrastructure ExposureAppetite for data/video continues to accelerate the need for more advanced based systems, 4G or LTEplays directly to ADI’s signal processing strengths60% of ADI’s Communication segment comes from communication infrastructure and wirelessVirtually every wireless call, text, picture or download today passes through an ADI ICDrivers of growth:Need for higher performance radiosHigher density of channels to support increased dataImproved power efficiencySmaller footprintLower cost per channelShort-term and long-term benefitsupgrades to 3G and 4G now and will continue in the futureMore rollouts /upgrades
- 28. Best-in-Class—Data ConvertersMarket leader in data converter technology (46% market share--exposed to literally every region)In 2010, accounted for 47% of sales (29% increase from 2009)Data converter market expected to increase 9% every year through 2015Demand for ADI converter technology driven by:Proliferation of digital systemsIncreasing number of channels of signal processing in new, emerging applicationsData converters determine the overall performance of a systemADI offers high-performance, best-in-class solutionsContinuously improving architecture and process technologies to meet customers’ needsCustomer Design Process:Begins with ADI data converters incorporates other components of ADI product portfolio
- 29. Company RiskDependence on third-party subcontractors:Relies on subcontractors and third-party wafer fabricatorsGenerates 50% of its revenue from products at third-party wafer-fabrication facilitiesRisks: reduced control over availability, capacity utilization, delivery schedules, manufacturing yields and quality and assurance costsLack of long-term sales contracts:Demand may be volatile in certain end-markers(Long-term contracts are unusual for Semi companies due to constant technological change and upgrades)Intense competition:TechnologicalPricingFluctuations in foreign currency:Very sensitivederives 80% of revenue from international markets
- 30. Sector RiskIndustry is highly cyclical—vulnerable to economic downturns
- 31. Most semiconductor companies carry risk due to increasing R&D expenses in the industry
- 32. Higher inventory levels, lower utilization rates and softer orders pose risks to industry’s profitability
- 33. Increased consolidation across industryeconomies of scaleSector StrategyONNN’s Back-Up PlanThe general Semi market is expected to grow 5-9% this year
- 34. Play to reduce exposure to the Auto Industry
- 35. Negative outlook for Autos for the next 1-2 years
- 36. Auto market accounts for only 13% of ADI’s revenues v. 22% of ONNN’s revenues
- 37. Diversify geographic exposureless reliance on one region (like ONNN and Japan)Current AllocationProposed Allocation10
- 41. Growth Analysis & CAGRs14
- 42. Projections15
- 44. One Year Stock Chart17
- 46. Team Recommendation: BenchTop Three Reasons to Bench: