Analog Devices Inc. CEO Vincent Roche made a big pitch for more space-related revenues in his company earnings call this week.
ADI could double its space-related business over the next five years, partly due to the growth in terrestrial terminals that communicate with satellites, he said.
The company reported revenue of $1.3 billion in the first quarter, in line with expectations, although 15% below a year ago.
Officials on Wednesday described a decline in first quarter revenue in wireless and wired markets of 31% and predicted a high likelihood of a second quarter delay in 5G rollouts in China due to the impact of the coronavirus. The communications segment was 18% of all revenues for the quarter.
The company’s outlook for the second fiscal quarter, which started Feb. 2, calls for revenues of $1.35 billion which includes a $70 million revenue reduction due to the coronavirus impact.
In November, Roche had said that the industry’s move to 5G had been slower than expected but this week said demand across all of ADI’s end markets had stabilized and was beginning to show signs of improvement.
Roche placed confidence in ADI’s technological innovations across areas of ubiquitous sensing, hyper-scale and edge computing and pervasive connectivity.
Operating income for the first quarter was $273 million, down by 40% over a year ago. The company’s stock opened Friday at $122.63.
Roche said last year that inventory reductions and restructuring would save the company $50 million.
In comments with analysts, Roche described key trends for ADI as 5G, electric vehicles, factory automation and data center. He also put a special emphasis on space markets.
Space customers focus on RF signal processing and power management under extreme cosmic radiation and high temperatures.
“We solve these challenges through the combination of our comprehensive product portfolio and passive knowledge base built over many decades of serving these markets,” he said, according to a transcript from Seeking Alpha.
Space markets make up just 2% of ADI’s revenues, but Roche said there’s the potential to double that business over the next five years. Part of the reason is the terrestrial terminals to communicate with satellites will grow in the millions in the future, he said, creating the potential for ADI to be a supplier as well as a system architect to customers.
“Space has the potential to be a meaningful growth driver and unlock value across other verticals as well,” Roche said. “Our ability to provide a comprehensive portfolio of space-grade solutions across the entire analog spectrum from RF and signal chain to power is unique. And this cannot be completely replicated by any of our competitors….”