Linear Technology, Maxim Integrated: The Other Lucrative Niche in Semiconductors

Since I wrote the Altera (ALTR) vs. Xilinx (XLNX) article, I have had multiple requests asking me what the other niche in semiconductors is - that has generated gross margins in excess of 60%...... the answer - Analog/Mixed Signal chips. Devices that perform functions like analog to digital and digital to analog conversion, power supply regulation, DC to DC conversion, etc. There are four companies in this space, but I will focus on the two companies that are better managed, and have pristine financials.

They are Linear Technology Corp. (LLTC) and Maxim Integrated Products (MXIM.PK). Maxim is in the process of re-stating earnings - as it did some options-backdating-shenanigans, and hence, needs to go back all the way to 2005, and redo the numbers that it reported. In the most recent conference call, MXIM's CFO said that it would re-file all of the 10Q's and 10K's [going back to 2005] - by the end of 2008. Hence, there is more risk in buying MXIM's stock [and hence a greater capital appreciation potential too].