Analog Devices shares climb after upgrade

NEW YORK — Shares of Analog Devices Inc. climbed Thursday after a Raymond James analyst upgraded the chip maker, saying it is "getting into fighting shape" by cutting expenses, which could boost its margins.

Analyst J. Steven Smigie raised his rating to "Strong Buy" from "Market Perform," with a target price of $32.

"ADI is driving financial model changes through cost cutting and cost saving initiatives, which we think can drive a record-high operating model as we move through this cycle," the analyst wrote in a note to investors.

Smigie said the company will benefit from consolidating two of its facilities to improve margins. He also cited a renewed focus on keeping operating costs under control."

Analog Devices, like other semiconductor companies, has seen a decline in chip demand amid the recession, as consumers and companies have cut back on technology spending. Smigie estimates 2009 earnings of 86 cents per share and revenue of $1.93 billion for the company.

While he did not change his projections Thursday, the analyst said he has "continued to see upward revisions to estimates" as chip makers are "slowing in their inventory burns and are beginning to close the gap between shipments and demand."

Also Thursday, Analog Devices said it priced an offering to sell $375 million of 5 percent senior unsecured notes due in 2014. The company plans to use the proceeds for general corporate purposes.

"We believe the sole purpose of the debt offering is to bolster ADI's domestic cash levels and the deal in no way signals a pending acquisition," wrote Deutsche Bank analyst Ross Seymore, who rates the company "Buy," in a client note.

Shares of the Norwood, Mass.-based company rose $1.06, or 4.5 percent, to close at $24.79. In the past 52 weeks, the stock has traded between $15.29 and $34.41.