Linear Tech’s Stock Implosion (LLTC)

Linear Technology Corporation (NASDAQ: LLTC) may be causing more damage to chips and technology component stocks than anything else this morning.  The maker of high-performance linear integrated circuits showed that revenue increased 1% to a record of $310.4 million over the previous quarter’s revenue of $307.1 million and a 10% gain from a year earlier.  Non-GAAP earnings were $0.53 per share, up $0.02 sequentially and $0.08 year-over-year.

Its net earnings of $0.48 were up 4% sequentially from last quarterand up 20% over the year-ago period.  A"discrete tax benefit" positively impacted net income by a lower taxrate. Net income increased $16.1million or 18% over the first quarter of fiscal year 2008.

Cash and short-term investments balance increased $55.2 million to $1.0billion, net of spending $23.1 million to purchase approximately737,000 shares of its common stock.

Its CEO, Lothar Maier, noted how the current economy is affecting theindustry: “…However, during the latter part of the September quarterand especially through early October, the Company began to see adecrease in new order bookings across all of the Company’s end-markets.We believe the current credit crisis and related economic uncertaintyhave begun to affect the semiconductor industry… we estimate that theCompany’s revenues will decline sequentially in the 10% to 20% rangefrom the September quarter. It is difficult to forecast what thedecline in revenues will be given the uncertain state of the economy asa whole…"

If you want to know how this compares to estimates, Linear’s 10% to 20%sequential drop (rather drastic) would come to roughly $248 million to$279 million.  That is unbelievably short of the $313.3 millionexpected by analysts, according to First Call.

The CEO did note that many costs are variable and they are taking stepsto adjust them lower, and believes the company can maintain pretaxprofits above 40% of sales even with the lower forecast sales range.

Shares today are not just at 52-week lows.  They traded as low as $20.53 right after the open.  If you look at today’s prices and this chart from BigCharts.com you will see that this is now essentially challenging the lows for the entire decade.  That is pretty amazing considering "the record quarters" it has seen.

Jon C. Ogg
October 15, 2008