Analog Devices (NYSE: ADI) today announced revenues of $701 million for the third quarter of fiscal 2000, up 85% from the prior year’s third quarter and 21% above the immediately prior quarter. Earnings per share, excluding the realized gain on an investment sold during the third quarter, were $0.43, nearly three times the $0.15 reported for the year-ago quarter and 34% above the second quarter’s $0.32. Diluted earnings per share for the third quarter including the one-time gain were $0.50.
The continuing very strong demand for high-performance signal processing ICs used in a very broad range of applications resulted in Analog’s exceptional revenue growth in the third fiscal quarter, said Jerald G. Fishman, President and CEO. Our third-quarter analog revenues grew 71% year over year and 18% sequentially, while our DSP revenues grew 143% year over year and 30% sequentially. ADI’s growth in these two key product areas was again well ahead of the markets’ growth, which we believe provides clear evidence of our continuing gains in market share in both product areas.
Our sales into the communications market accounted for 45% of the third quarter’s revenues, which represented a gain of 131% over the third quarter last year and 23% above the immediately prior quarter, Mr. Fishman said. We continue to benefit from accelerating demand for increased bandwidth as Internet usage continues to grow dramatically. DSL, cable modems, central office concentrators and optical networking products all continued growing rapidly. We are also seeing strong growth for products used in wireless infrastructure applications and wireless Internet appliances.
Our other served markets also showed good growth during the third quarter, he continued. Sales of products used in PCs and high-end entertainment products increased 16% from the immediately prior quarter. Sales into the industrial market rose 20% sequentially, due in part to strong demand from our ATE customers.
Commenting on the quarter’s financial performance, Mr. Fishman said, Gross margin rose 140 basis points sequentially and 740 basis points year over year to 57.1% of sales. Our improving gross margin is the result of the value ADI technology brings to its customers, as well as the success of our cost reduction and yield enhancement programs. The operating expense ratio for the quarter declined to 25.8% of sales from 27.8% for the second quarter despite a 14% sequential increase in R&D expense. Our higher gross margin and a lower operating expense ratio provided strong operating leverage, which resulted in our third-quarter operating profit ratio increasing by 340 basis points sequentially to a record-high 31.3% of sales. Earnings per share, excluding a one-time gain from the sale of an investment during the third quarter, increased to a record $0.43, up 187% from the third quarter last year and 34% sequentially.
Our balance sheet is in excellent condition, observed Mr. Fishman. Cash increased by more than $125 million, ending the quarter at more than $1 billion. Days of inventory also improved during the quarter.
Based on the results of our first three quarters and looking forward, Mr. Fishman said, fiscal 2000 will surely be a great year for Analog Devices, not only in terms of revenue and profit growth, but even more importantly, in positioning us for what we believe will be above-market growth rates for ADI’s products. We believe we can again achieve double-digit sequential revenue growth in the fourth quarter, which would be our seventh consecutive quarter of strong revenue growth. Our current plans call for sequential revenue growth of 12 to 14% to $785 to $800 million and earnings per share of $0.49 to $0.50.
Our preliminary view of fiscal 2001 is very encouraging as well, Mr. Fishman concluded. Based on current demand forecasts from our largest customers, coupled with the strongest product portfolio in our history, we believe our year-over-year revenue growth in fiscal 2001 could exceed 45%. High-performance analog and DSP are the right technologies for the new decade, and we are very well positioned to exploit our competencies in these areas with the very best customers.
