Analog Devices (ADI) this afternoon posted solid results for its fiscal first quarter ended Nov. 1, but also provided guidance for the January quarter that was well short of Street expectations.

For Q4, the company posted revenue of $661 million and profits of 49 cents a share; that beat the Street consensus at $655.1 million and 44 cents.

However, Analog Devices also said that it expects revenues for its fiscal Q1 ending in January to be down 20 percent sequentially; that would imply revenue of $528.8 million, well below the Street at $600.5 million. The company sees profits for the quarter of 22-23 cents a share, sharply lower than the Street at 35 cents. ADI said that it expects gross margin for the January quarter of 57-58 percent, down from 61.1 percent in the latest quarter.

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Merrill Lynch chip analyst Srini Pajjuri this morning cut his rating on Advanced Micro Devices (AMD) to Underperform from Neutral, while moving Analog Devices (ADI) in the other direction, to Neutral from Underperform.

Pajjuri notes that ADI is down nearly 30 percent since early June; he says the valuation now “mostly reflects our margin and growth concerns.” He notes that the stock trades at 12 times EV/FCF, a discount to other analog chip stocks. He points out that ADI boasts strong free cash flow and a three percent dividend yield, and that ADI has limited exposure to consumer and PC markets

As for AMD, Pajjuri says the change followed a review of his ratings following the call on ADI. “Although we have not changed our fundamental outlook for AMD, we believe it is relatively less attractive than other Neutral rated stocks in its cluster,” he writes.

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