Fairchild sees Q1 rev above estimates

BANGALORE, INDIA: Chipmaker Fairchild Semiconductor International Inc posted strong quarterly results and forecast first-quarter revenue above Wall Street expectations, underscoring the recovery in the chip sector and strengthening hopes for a strong 2010.

Last week, semiconductor bellwether Intel Corp posted solid fourth-quarter results and gave a bullish margin outlook on higher prices and firm demand for server chips, lifting hopes of a rebound in the chip sector.

"There certainly seems to be some better-than-seasonal growth taking place," Merriman Curhan Ford analyst Bill Ong said. "But the overall economy still seems pretty weak."

Fairchild began 2009 with a weak backlog and limited demand visibility as customers pulled out to adjust their inventories. The company slashed expenses by closing units and reducing headcount to cope with the economic downturn.

Fourth-quarter operating expenses dropped 69 percent to $90.3 million.

"On the cost side, we are reducing our manufacturing footprint and expect significant cost savings late in 2010 and early 2011," Chief Executive Mark Thompson said on a conference call with analysts.

Channel inventories were 7 percent lower on a sequential basis and are expected to be roughly flat in the current quarter, the company said.

Gross margins rose to 30 percent from 27 percent a year ago.

There is still some gross margin upside going forward, analyst Ong said.

Fairchild, which makes power-management and analog microchips, forecast first-quarter revenue of $370 million due to strong demand virtually across all markets, the company said. Analysts were looking for revenue of $335.8 million, according to Thomson Reuters I/B/E/S.

The company said it will record about $2 million in charges and $2 million of accelerated depreciation in the first quarter tied to previously announced closure of wafer fab units.

For the fourth quarter, the company earned $13.1 million, or 10 cents a share, reversing a loss of $218.1 million, or $1.76 a share, a year ago.

Excluding items, Fairchild, whose competitors include Texas Instruments Inc, On Semiconductor and National Semiconductor Corp, earned 23 cents a share, while analysts were expecting 17 cents a share.