ADI sees profit in signal-processing chain
The company avoids market segments with too much competition, commoditization, and ASP erosion.
Rick Nelson, Editor-in-Chief -- EDN, March 16, 2010
Analog Devices is focusing on the entire signal chain while avoiding market segments with too much competition, commoditization, and ASP erosion, according to president and CEO Jerald Fishman. The company's focus is "to do fewer things better," Fishman said in his introductory comments at a March 11 presentation to analysts. The refocused effort, said Dave Zinsner, VP and CFO, is expected to yield compound annual growth rates in the range of 8% to 12% over the next five years.
Fishman and Zinsner were joined at the event by officials who commented on various aspects of the company's business. Robbie McAdam, VP of core products and technologies, said the company is well positioned to meet the constant appetite to bring more signals into the analog domain. He said that 94% of ADI's business focuses on signal processing; for the standard linear market, he said, 53% of the business involves signal processing while 47% is in power management.
Few companies, McAdam said, can claim more than 30% share of any market segment, and he added that ADI claims 44% of the converter market, putting it in such company as Intel (with 66% of the microprocessor market), Samsung (with 30% of the DRAM market), and Texas Instruments (with 42% of the 3G smart-phone processor market). As evidence of the goal of avoiding eroding ASPs, McAdam said that the company's high-performance amplifiers command five times the industry's average price for amplifiers. He noted that there are 60,000 customers for ADI's 10,000 core products; those customers, he said, are risk-averse ones for whom brand matters. A company goal, McAdam said, is to double the number of ADI parts per design.
McAdam sees opportunities in the RF market, commenting, "Frequency is the last frontier." He also sees opportunities in sensors, particularly in automotive applications (for functions like stability control, airbag deployment, and cruise control) as well as in industrial and medical applications.
McAdam said that ADI is focusing its Sharc and BlackFin DSPs on video-based driver assistance systems, home-entertainment audio processors, motor-control processor subsystems, smart-energy meter subsystems, and portable medical devices. He also said that ADI is addressing some segments of the power management market, including digital cameras, communications infrastructure, industrial and medical applications, and some general-purpose consumer and cell-phone applications.
VP for converters Dick Meany drilled down on the converter market, saying that ADI's converter business establishes a "beachhead to the BOM," providing a vantage point from which the company can capture board real estate for other signal-chain components. Peter Real, VP for linear and RF, commented on the company's RF business. He described RF as fundamentally a signal-processing challenge (extracting a desired signal from a dirty environment) that the company is well positioned to address in communications-infrastructure, automotive, industrial-and-instrumentation, healthcare, and consumer applications.
VPs Mike Britchfield and Pat O'Doherty elaborated on for industrial and instrumentation and healthcare businesses, respectively. Britchfield said the company is targeting smart-grid, process-control and monitoring, motor-control, and robotics and machine-vision applications. O'Doherty said the company is addressing in-patient and out-patient healthcare markets. Specific applications the company serves include computed tomography, magnetic-resonance imaging, ultrasound, portable patient monitoring, and consumer healthcare products.
CFO Zinsner concluded the event saying ADI plans to grow revenue faster than the served market, grow earnings faster than revenue, generate a strong free cash flow, and provide conservative financial management.
