Analog Devices: Better Than Expected Biz From China, Nintendo

Michael McConnell, an analyst at Pacific Crest Securities, yesterday raised estimates for 2007 and 2008 for Analog Devices (ADI), citing “increased fab loadings” (which is industry speak for “they are making more chips”) due to stronger-than-expected bookings.

The extra bookings are coming from two sources. One, he sees Nintendo (NTDOY.PK) Wii units up 30% in the fiscal second quarter ending in April from the January quarter. He notes that this is in sharp contrast to “sharp seasonal sequential declines” in build activity for the Microsoft (MSFT) Xbox 360 and the Sony (SNE) Playstation 3.

McConnell says the Wii offers “an incremental revenue opportunity” of $88 million this year and $75 million next year. McConnell notes that his colleague Evan Wilson, who covers the gaming market, sees 16 million Wii units built in 2007, and 15 million in 2008. The smaller number for next year reflect expectations for lower-cost versions of both the Xbox and the PS3.

Meanwhile, McConnell also says he expects incremental revenue of $15 million this year and $37.8 million next year from the deployment of TD-SCDMA networks in China (TD-SCDMA is an acronym which stands for Time Division-Synchronous Code Division Multiple Access; it is a 3G networking standard that’s been created in China).

McConnell raised his EPS estimate for the October 2007 fiscal year to $1.65 a share from $1.55; for 2008 he goes to $1.93 from $1.79. He continues to rate the stock Outperform.

Analog Devices yesterday was up 28 cents at $36.44.

ADI 1-yr chart

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