Analog Devices (NYSE: ADI) posted better-than-expected fiscal third quarter results Tuesday after the close. Still, shares were down close to 5% in after-hours trading as the chipmaker reported lower than expected margins in the quarter.

The company earned 22 cents per share in the quarter, higher than the 20 cents per share analysts had been expecting. In addition, the company also reported higher revenue numbers than the consensus Street's forecasts.

Analyst upgrades:

• Barclays believes Procter & Gamble's (NYSE: PG) portfolio mix provides better leverage to stabilizing macro trends. The firm upgraded shares to Overweight from Equal weight and raised its target to $60 from $56. Note the firm downgraded Colgate (NYSE: CL) to Equal Weight from Overweight.
• Deutsche Bank upgraded McDonald's (NYSE: MCD) to Buy from Hold as it finds the risk/reward on shares compelling at current levels and sees upcoming catalysts from McCafe and easing commodity pressures. The firm raised its target price to $65 from $60.
• FBR Capital upgraded Talbots (NYSE: TLB) to Outperform from Market Perform to reflect an attractive risk/reward, reduced risk of a bankruptcy, and merchandise improvements. The firm raised its target price to $4 from $2.
• Nokia (NYSE: NOK) was upgraded to Buy from Hold at Deutsche Bank.
• Analog Devices (NYSE: ADI) was upgraded to Neutral from Underperform at Baird.

This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.

"I think Wall Street has made a poor assessment of Analog Devices (NYSE: ADI)," says Paul McWilliams. Here's a look at the chip maker from his technology-focused newsletter, Next Inning.

"Analog Device's top line guidance came in a bit below Wall Street expectations. However, I think the problems are between the Hudson and East Rivers and not in Norwood, Massachusetts, the hometown of Analog.

"What Wall Street appears to be missing is that since ADI has sold off some of its lower profit business units, its seasonal sales patterns have changed. ADI is now again driven by industrial market sectors much more than it was even just last year.

"Therefore, its conservative guidance of flat to up 3% sequentially shouldn't have been a big surprise nor a cause for concern. As a matter of fact, with its minimal exposure to PC and consumer markets, I think flat to up 3% is pretty good.

"What Wall Street would be better to focus on are the operational improvements ADI has made. In its July quarter, ADI improved its pro forma operating margin to 26.5% from 26.2% last quarter and again reduced its inventory, which sits now at the lowest level we've seen since 2004.

TheStreet.com's Jim Cramer says all that money has to go somewhere, and this is a likely destination.

Clash of the ideals! Oil's down, and what can you buy when there's so much bad bank news? What can you buy when Wachovia (NYSE: WB) (Cramer's Take) is boosting reserves and Morgan Stanley (NYSE: MS)) (Cramer's Take) is still being pursued by authorities and JPMorgan (NYSE: JPM) (Cramer's Take) says July stunk and UBS (NYSE: UBS) (Cramer's Take) is so tarnished that you can't believe it was once the most conservative blue chip out there.

The answer is tech, of course!

Wait a second. Would anyone mind if we actually had a reason to buy tech beyond the Kindle, the device that made Citigroup gaga about Amazon (NASDAQ: AMZN) (Cramer's Take) -- not that you needed a device to do that.

Sure, we have pre-seasonality. Remember, you are supposed to buy tech at the end of the summer, not that anyone waits that long.

But what we really have is that quant thinking that Doug rails about so correctly: the CDO of stocks! We take a little bad tech, the lowest-end stuff like RF Micro (NASDAQ: RFMD) (Cramer's Take) and Parametric (NASDAQ: PMTC) (Cramer's Take); mix in some mid-tech, stuff like National Semi (NYSE: NSM) (Cramer's Take) and Analog Devices (NYSE: ADI) (Cramer's Take); then throw in Intel (NASDAQ: INTC) (Cramer's Take), Microsoft (NASDAQ: MSFT) (Cramer's Take), Google (NASDAQ: GOOG) (Cramer's Take), Amazon and Adobe (NASDAQ: ABDE) (Cramer's Take) -- yes, Adobe; then split them into tranches, slice 'em up, and offer a derivative on them for those who want leverage and we have, well, a tech rally!

"Most people think that analog is dead," notes wireless sector expert Nikhil Hutheesing, adding "But analog is still a rapidly growing part of the semiconductor business."

In his Forbes Wireless Stock Watch, he explains, "And there is really only one company that provides a soup to nuts analog system for wireless infrastructure products.: that company is Analog Devices (NYSE: ADI)." Here is his review.

"Digital chips, which store data in ones and zeroes, operate by differentiating between on and off signals.

"Analog chips, by contrast, process gradations and are able to process waveforms such as speech, music and video. So analog chips create a bridge to the digital world where data is stored and manipulated.

"Digital chips themselves are ill-suited for communicating.As digital circuits shrink to ever smaller sizes, the value in the analog portion, that doesn't scale well, continues to rise.

"A year ago, I would not have recommended Analog Devices. The company was struggling. From 2004 to 2007 ADI posted a 1% compounded annual growth rate in revenues and earnings per share.

"During that time, the company was a provider of handset basebands (modems inside a phone) which really became a commodity business. It was also in the PC power management businesses, which was also a drag on the overall growth of the company.

MOST NOTEWORTHY: Analog Semiconductors, OrthoVita and First Solar were today's noteworthy initiations:

• Morgan Stanley initiated Analog Semiconductors with an In Line rating. The firm assumed National Semiconductor Corp (NYSE: NSM) with an Overweight rating and $26 target and is the firm's top pick; Analog Devices (NYSE: ADI) and Linear Tech (NASDAQ: LLTC) were initiated with Equal Weight ratings and a $32 target and $34 target, respectively.
  
• Barrington believes OrthoVita (NASDAQ: VITA) is the market share and technological leader of the biomaterials market. The firm assumed shares with an Outperform rating and $4 target.
  
• Canaccord Adams believes First Solar's (NASDAQ: FSLR) management and business model are among the best of any PV company and that execution has led to strong profitability plus a successful aggressive capacity ramp. Shares were started with a Buy rating and $325 target.

OTHER INITIATIONS:

• Morgan Stanley initiated Yum! Brands (NYSE: YUM) and Domino's Pizza (NYSE: DPZ) with Equal Weight ratings and targets of $40 and $15, and also initiated McDonald's (NYSE: MCD) and Burger King (NYSE: BKC) with Overweight ratings and targets of $65 and $34.
  
• Lehman initiated Alcoa (NYSE: AA) with an Overweight rating and $44 target.

Analog Devices (NYSE: ADI), a semi-conductor company is expected to report 3Q EPS of 39 cents, according to Thomson First Call. ADI call option volume of 4,600 contracts compares to put volume of 3,460 contracts. ADI December option implied volatility of 48 is above its 26-week average of 33 according to Track Data, suggesting larger price risks.

Marvell (NASDAQ: MRVL) is expected to report Q3 EPS of .08 cents tonight according to Thomson First Call. MRVL, a manufacturer of chips for hard disk drives and networking gear, is recently up 29 cents to $16.28. MRVL call option volume of 95,527 contracts compares to put volume of 14,814 contracts. MRVL December option implied volatility of 68 is above its 26-week average of 45 according to Track Data, indicating buyers of calls are hedging for upside share price gains.

Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Analog Devices Inc (NYSE: ADI), the high-end wireless chip maker, reported revenue results which slightly exceeded analysts' estimates, however, came in a little light on the bottom line. Analog, for those who do not recall, was one of the best performing U.S. stocks during the 1990s, as many of its high-end chips were in strong demand as wireless networks were constructed around the world.

However, this decade Analog has seen increased competition, particularly from Texas Instruments Incorporated (NYSE: TXN), in the high-end market which has put a damper on its previously strong results. Yesterday's results point to that again as expenses were a bit higher than consensus.

Conversely, National Semiconductor Corporation (NYSE: NSM) has turned into a superb grower in the wireless space this decade. Receiving an upgrade yesterday from Lehman Brothers as the stock has pulled back 14% the past month and a half. Lehman upped its price target to $31 from $29, and increased its rating from Equal Weight to Overweight.

As we have been blogging for the past year, National Semi is in the sweet spot of the wireless semi-space. Buy and stay with this stock as there is good money to be make here. Integrated chips is what the market wants and National provides them.

Chip maker Analog Devices (NYSE: ADI) announced that it is adding $1 billion to its share buy-back program. That figure would be about 12% of current shares outstanding. The move would obviously improve EPS as the share count drops.

ADI's shares did not move up on the news and still sit at about $36.

Perhaps the reason that the stock did not move is the same reason the shares have been virtually flat for the last five years. The company is really not in a compelling business. In 2006, revenue was $2.6 billion about the same as it was in 2000. Operating profit has actually dropped from $767 million in 2000 to $552 million last year.

Analog Devices operates in a fairly crowded field that includes Broadcom (NASDAQ: BRCM) and Nvidia (NASDAQ: NVDA). Competition can squeeze margins, and chip companies as a group have not done terribly well in the market recently.

Wall Street would think ADI would have something better to do with its money. That might be to buy smaller companies to improve its competitive position or increase R&D spending. But, it appears that would be asking too much.

Douglas A. McIntyre is a partner at 24/7 Wall St.

MOST NOTEWORTHY: AutoZone, Inc (AZO), Blue Nile, Inc (NILE), MetLife, Inc (MET), Analog Devices, Inc (ADI) and Advanced Micro Devices (AMD) topped out today's list of noteworthy downgrades:

• Citigroup cut AutoZone (NYSE: AZO) to Hold from Buy with a $145 target based on valuation.Gabelli also downgraded shares of AutoZone to Hold from Buy.

• Lehman downgraded shares of Blue Nile (NASDAQ: NILE) to Equal Weight from Overweight, citing valuation and competitive concerns from Amazon.com (AMZN), which may look to strengthen their position in the diamond engagement market.

• MetLife (NYSE: MET) was cut to Neutral from Buy on valuation.

• Analog Devices Inc (NYSE: ADI) was cut by Credit Suisse and JP Morgan to Neutral from Outperform, by Sanders Morris to Neutral from Buy and by Merrill Lynch to Sell from Neutral after the company reported weak Q2 results.

• Matrix downgraded Advanced Micro Devices (NYSE: AMD) to Strong Sell from Hold based on the loss of market share to Intel Corp's (INTC) new products...

OTHER DOWNGRADES:

• Lehman cut Xcel Energy Inc (NYSE: XEL) and Pinnacle West Capital Corp (NYSE: PNW) to Underweight from Equal-Weight.

• Bernstein downgraded Chevron Corp (NYSE: CVX) to Market Perform from Outperform.

• Credit Suisse downgraded ValueClick, Inc (NASDAQ: VCLK) to Neutral from Outperform.

• Bear Stearns cut CNOOC Ltd (NYSE: CEO) to Peer Perform from Outperform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

The answer is a definite yes for the Babson College team of undergraduate investment researchers that won the CFA Institute's Global Investment Research Challenge in New York on April 26th. The competition pitted teams against each other based on the quality of their securities analysis. And the Babson team won by defending its buy rating on Analog Devices Inc. (NASDAQ: ADI).

Having won the New England Regional competition earlier in April, they were invited to compete against the winners of the New York, Texas, and Hong Kong competitions. In addition to accolades and a certificate, the victory brings a $10,000 cash award to Babson College from the CFA Institute, and the students will ring the opening bell at the New York Stock Exchange.

Why did the Babson team recommend a buy on Analog Devices?

The Babson team set a one-year price target of $45.95, 17% above its closing price of $39.16 last Friday. They weighted the short- and long-term valuations equally and concluded that the stock was undervalued although the consensus short-term earnings forecast for the company may be a bit high.

National Semiconductor (NYSE:NSM) reported some pretty bleak figures yesterday, but UBS upped its price target on the firm from $25 to $27. It still rates the company's shares "neutral." It may be an example of things being so bad in the chip industry that even mediocre results are considered OK.

For the quarter ending February 25, NSM revenue dropped 21% to $431 million. Wall Street expected $434. Net income dropped to $72 million from $130 million in the year ago period.

The company did say its expected revenue of $444 million to $457 million in the current quarter.

The stock may have gotten cheap. It traded for $30 last May, and recently was as low as $22.20. It closed yesterday below $26 but is up 4% today.

The huge oversupply of semiconductors may finally be behind the industry. Shares in Analog Devices (NYSE:ADI) and ST Microelectronics (NYSE:STM) have also started to recover.

If all of the companies show even minimal growth in the next quarter, the market may assume that their revenue could actually begin to grow again in the second half. It would be a relief for investors who have taken a beating in this sector.

Douglas A. McIntyre is a partner at 24/7 Wall St.

MOST NOTEWORTHY: Seagate Technology (STX), Analog Devices inc (ADI) and Whole Foods Market Inc (WFMI) were some of today's notable upgrades:

• AG Edwards upgraded Seagate Technology (NYSE: STX) to Buy from Hold citing improving fundamentals as the company ramps 1.8" drives in the first quarter, with a potential Apple (AAPL) qualification, and market share gains in notebooks.

• ThinkEquity upgraded Analog Devices Inc (NYSE: ADI) to Accumulate from Source of Funds, with a target of $38, as they believe the improvement in bookings are sustainable; Citigroup also upgraded Analog Devices, to Buy from Hold, to reflect the company's earnings expectations.

• William Blair upgraded Whole Foods Market Inc (NASDAQ: WFMI) to Outperform from Market Perform based on valuation and the benefits of the Wild Oats Markets (NASDAQ: OATS) acquisition; HSBC upgraded shares of Whole Foods to Neutral from Underweight, with a $52 target, and UBS upgraded shares to Buy from Neutral based on the acquisition.

OTHER UPGRADES:

• Prudential upgraded Goldcorp inc (NYSE: GG) to Neutral from Underweight citing the increase in gold prices and a potential increase in Penasquito mine reserves.

• Stifel upgraded QMed Inc (NASDAQ: QMED) to Buy from Hold on improved revenue visibility.

• IHOP Corp (NYSE: IHP) was upgraded at Raymond James to Outperform from Market Perform with a $64 target.

• Bernstein upgraded Commerce Bancorp Inc (NYSE: CBH) to Outperform from Market Perform.

• Stereotaxis Inc (NASDAQ: STXS) was upgraded to Neutral from Sell at Goldman Sachs following its better-than-expected fourth quarter.

• RBC upgraded Labopharm Inc (NASDAQ: DDSS) to Outperform from Sector Perform.

• Morgan Stanley upgraded National Semiconductor Corp (NYSE: NSM) to Overweight from Equal Weight citing improving fundamentals and valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

As we move toward the end of the year, 24/7 Wall St. went looking for ten undervalued big cap stocks. We looked at research reports, P&Ls, balance sheets, projections, SEC filings and stock price movement. We came up with ten companies that the market appears to have passed by, or simply doesn't like. But each one has the makings of a winner.

Gannett. Investors hate newspaper stocks, but Gannett Co., Inc (NYSE:GCI) has a huge web presence and monopolies in many of the markets in which it operates. The company is also a cash machine.

eBay. The holiday season should be good for eBay Inc. (NASDAQ:EBAY) as industry figures show that e-commerce is coming into its own. The company's PayPal division is a juggernaut.

Sprint. There are only three significant players in the growing U.S. cell market and Sprint Nextel Corporation (NYSE:S) is one. After missteps with the NexTel integration, the company's new WiMax network should pay big returns for investors.

Hovnanian. With housing prices falling and sales of new and existing homes off, who could love a home building stock? The CEO says the market has hit bottom and Hovnanian Enterprises, Inc.'s (NYSE:HOV) land hedging strategy is among the most conservative in the industry.

Alcoa. The world's largest aluminum company. The bull case is that demand in India and China will push up prices for more than the next decade. Alcoa Inc. (NYSE:AA) also just dumped a dog division.

Analog Devices. Analog Devices, Inc. (NYSE:ADI) trades well below where it did five years ago. Net income rose 19% in the last quarter. The board just increased its share buy-back and upped the dividend.

The Washington Post Company (NYSE:WPO). Most investors assume this is a newspaper company. It is not. Its Kaplan and other online learning operations are highly profitable and are becoming the lead operating income divisions for the company.

Anheuser-Busch. Beer is not sexy, but Anheuser-Busch Companies, Inc. (NYSE:BUD) is making purchases to position itself in South America and China. It is also raising prices, a good sign that demand is strong.

Amgen. Cash flow is running 32% of sales. Analyst have been upgrading the stock as antitrust litigation against the company seems to be favoring Amgen, Inc. (NASDAQ:AMGN). Earnings in the last quarter beat forecasts.

Linear Technology. Part of the out-of-favor semiconductor industry. Linear Technology Corp. (NYSE:LLTC) is impressively profitable and analyst price targets on the shares are well above the current price.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Private equity firms are certainly hungry for semiconductor firms, such as the $17.6 billion buyout of Freescale. And recently there was the proposed $5.5 billion deal for Advanced Semiconductor Engineering.

An analyst at Prudential, Mark Lipacis, has put together a buyout list. Basically, he focuses on what private equity firms like -- lots of cash and cash flow.

His picks? Here's a look:

Altera (ALTR)
Analog Devices (ADI)
Linear Technology (LLTC)
Maxim Integrated Products (MXIM)
Texas Instruments (TXN)

Remember, there's a reason that semiconductor companies have lots of cash: the industry is cyclical. If the economy goes south, these companies can wait it out.

And it does look like the economy is slowing down. So if these semiconductor companies take on huge amounts of debt, might they be vulnerable?

Perhaps. But so far, it seems like private equity firms are far from concerned.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.