For Analog Devices, it's in the chips
Investing in new technology despite the downturn pays off in the recovery
Analog Devices Inc. is not the kind of company that can generate a good year from just a few hits.
“We sell 10,000 different products to 60,000 customers around the world,’’ said Analog chief executive Jerry Fishman, “and many of those products have 10 different variations.’’
The integrated circuit company has to continually innovate over a broad range of technologies and adjust its manufacturing to synch with anticipated demand.
Analog, based in Norwood, had a very good 2010. Revenue was up 35 percent over the previous year, at nearly $3 billion. The stock price reflected the surge: On March 31 of this year, it closed at just over $39, $10 more than the previous year.
Analog’s performance made it the top Massachusetts technology company in this year’s Globe 100, and number two in the overall list.
Yet the seeds for Analog’s success were sown much earlier, during the downturn that followed the financial meltdown of late 2008.
“The hardest part of our business is dealing with the cycles,’’ Fishman said. “When things are bad, the tendency is to think that they’re going to keep going bad.’’
And in late 2008 and 2009, things were bad.
Yet it was during that downturn that Analog decided to “make a big bet’’ on the economy. “We made a judgment that the downturn was an anomaly,’’ Fishman said. “We continued to invest in our products and our workforce.’’
When the economy started to recover early in 2010, “we were ideally positioned,’’ he said.
Analog, established in 1965, makes the high-performance integrated circuits that translate real-world phenomena such as temperature, pressure, sound, light, speed, and motion into electrical signals for virtually all kinds of electronic equipment. The company has 8,500 employees worldwide, including 2,200 in Massachusetts.
Demand for Analog circuits has risen steadily as companies in its core sectors add more digital features. Automobiles, for example, are rapidly acquiring sophisticated digital controls, many powered by Analog chips. And phone companies are loading their towers with faster circuits to process increased traffic.
“Virtually every phone call that’s made in the world touches an Analog product,’’ Fishman said.
Industrial applications have been profitable for Analog for years.
“They are way out in front in that technology, double their nearest competitor,’’ said Stephan Ohr, a research director at Gartner Inc. “Analog has kept their focus on higher precision, higher speed products for a very long time. They are leading the curve.’’
It’s not a lead they plan on surrendering.
“Generally we invest 17 or 18 percent of sales every year in new product development,’’ said Fishman.
That’s the strategy the company embraces to build its future.
“We’ll make our way with innovation,’’ Fishman said. “We’re mostly in business today because we can out-innovate our competitors. That’s been the case for forty years, and it will be for the next forty years.’’
D.C. Denison can be reached at email@example.com.