National Semionductors posts narrower-than-expected loss

Duncan Martell

SAN FRANCISCO: Chipmaker National Semiconductor Corp. on Thursday reported a

fiscal third-quarter loss after a year-earlier profit, but said revenue was

growing after a global slump in sales.

The company, a leading maker of chips used in cell phones and

computer-display monitors, said it expects fourth-quarter revenue to increase by

6 percent to 9 percent from the third quarter, paced by sales of semiconductors

into flat-panel display and cell phone markets. Its stock rose after the news.

"They grew revenues 1 percent sequentially, which is better than I

expected," said Tore Svanberg, an analyst at Robertson Stephens. "More

important is the outlook, which I think is quite strong."

The company, based in Santa Clara, California, reported a loss of $37.8

million, or 21 cents a share, for the quarter ended Feb. 24, compared with net

income of $39.2 million, or 21 cents in the year earlier period. Revenue

declined to $369.5 million from $475.6 million a year earlier.

The average analyst forecast was for a loss of 27 cents a share, with

estimates ranging from a loss of 19 cents to 29 cents, according to Thomson

Financial/First Call. Revenue was pegged at $364 million.

Backlog increased



The company's backlog increased in the third quarter in important markets,
chairman and chief executive Brian Halla said on a conference call. The company

is also continuing to make impressive gains in the cell phone market.

In the last semiconductor boom cycle from 1998-2000, National sold about

$1.25 worth of its chips in each cell phone that its customers, such as Samsung,

made. And the company has been making headway recently in the sector, most

notably with Ericsson's just released T66 mobile phone, where National Semi is

selling about $20 worth of chips per phone.

National Semi said although shipments are quite small, the T66 model has sold

out in Europe.

But Halla, in an interview, continued to hold off on calling a return to

growth in the overall chip industry. "A lot of our good news is the

increased penetration of the display market and the increased participation in

the cell phone market, and I don't want to generalize that to the rest of the

industry," he said.

Still, analysts found measured hope in National's results.

"Semiconductor companies are exhibiting stronger signs that they've reached

a bottom, but I continue to be concerned about the state of the end

markets," or overall demand, said Doug Lee, an analyst at Banc of America

Securities.

National said it expects revenue of $390 million to $405 million in the

fourth quarter. Chief financial officer Lewis Chew said on a conference call to

discuss the results that he expects a fourth-quarter loss of 12 cents a share to

16 cents a share.

Analysts are expecting the company to post a loss of 16 cents a share on

revenue of $379 million. "It looks like business continues to turn around

for these guys," Svanberg said. "This February quarter is seasonally

slower but it looks like they're right back to growth in the May quarter."

Shares rise



National Semi's stock rose $1.35, or 4.3 percent, to $32.96 -- resuming trade
after being halted for news before the release of its results. The stock has

risen 7 percent this year, compared with a 17 percent increase in the

Philadelphia Semiconductor Index in the same period.

Orders, or bookings, in the third quarter rose 22 percent from the second

quarter, and 16 percent from the year-ago period.

Microchips that the company sells into the flat-panel display market, as well

as the traditional computer monitor market, led the quarter, National

Semiconductor said. Wireless handset products, including power management chips,

audio chips and wireless application-specific solutions, also led to stronger

bookings during the third quarter.

Turns orders, those placed and filled in the same quarter, were higher than

in the second quarter. Analysts had not expected a huge positive revenue

surprise in the just-completed third quarter, because of the large number of

turns orders needed to achieve its earlier stated revenue guidance.

Sales of its products into the wireless market accounted for 25 per cent of

total revenue, while networking and communications accounted for 10 percent.

Revenue from the personal computer market was 12 per cent to 15 per cent, revenue

from the market for information appliances was 5 per cent, displays accounted for

10 per cent, and sales of analog chips were about 35 percent of total revenue.