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NatSemi Profit Soars in Quarter

September 10, 2004|From Reuters

Chip maker National Semiconductor Corp. on Thursday posted better-than-expected quarterly earnings and revenue as an improved product mix supported strong profit margins.

Net income quadrupled to $117.7 million, or 31 cents a share, for its fiscal first quarter ended Aug. 29 from $29.7 million, or 8 cents, a year earlier.

"The quarter was very solid," said Tore Svanberg, an analyst at Piper Jaffray & Co., pointing to the company's widening gross profit margin.

Revenue rose 29% to $548 million from $424.8 million.

Shares rose $1.48 to $13.48 on the New York Stock Exchange. Year to date, the company's shares are down 32%. The chip-stock sector overall has been hammered by concerns about slowing orders.

Analysts had expected a first-quarter profit of 26 cents a share, on average, on revenue of $545.6 million, according to Reuters Estimates. The company trimmed its outlook last month.

National Semi joined larger chip makers Intel Corp. and Texas Instruments Inc. in warning of a slowdown, as some also have cautioned that their inventories were rising.

For its current quarter, National Semi said it expected distributors and some customers to continue "adjusting backlog and inventories." As a result, it expects revenue to decline 8% to 10% from the first quarter.

The forecast implies revenue of $493.2 million to $504.2 million. The company did not forecast earnings per share.

"The reason for our 8[%] to 10% guidance down [in revenue] is primarily because distributors want to adjust inventories," said Chairman and Chief Executive Brian Halla in an interview. "That's what most of this is all about."

Svanberg called the company's outlook "pretty weak," but he highlighted National Semiconductor's ability to maintain a gross profit margin of 50% or more even as revenue declines from the previous quarter.

"That's unheard of with National," Svanberg said, adding that "their product mix has improved considerably."

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