Lower Expectations at Natl. Semi Paint Bleak Picture for Wireless
By Suzanne Deffree -- EDN, November 8, 2006
National Semiconductor’s lowered guidance is a sign of a generally poor close to the year for the wireless communications sector, according to analysts.
The analog kingpin late Tuesday dropped its fiscal Q2 2007 revenue guidance to down 7 percent to 8 percent from the $541.4 million in revenues that were achieved its fiscal Q1, as compared to its previous down guidance of 2 percent to 5 percent sequentially. National Semi attributed the downward revision for the quartered ending November 26 primarily to lower-than-expected shipments to wireless handset customers.
“With NSM [National Semiconductor] citing wireless handsets as a key factor, we believe this may adversely affect sentiment in the wireless semiconductor food chain, and we continue to carefully monitor end demand,” Tim Luke, a Lehman Brothers analyst, said in a research note this morning.
Lehman’s projections were backed up by FBR Research. In a report released this morning by analysts Chris Caso and Elizabeth Pate the firm stated: “Relative to the analog semi group as a whole, we think NSM's announcement is somewhat backward looking, as it appears to reflect the handset weakness and inventory correction mentioned by most during the October reporting season -- but it also indicates that conditions are not yet getting better.”
Lehman further noted that National Semi’s revised expectations come on the heels of the firm lowering its estimates for wireless semi market player Motorola.
“Separately, we note that we lowered our estimates with respect to MOT [Motorola] yesterday, reflecting a more hesitant start to the December quarter; in addition, we also suggest that this weakness may be broader based rather than MOT-specific, including at NSM’s top customer NOK [Nokia]. Estimates for NOK are currently unchanged. We believe the December quarter may continue to show weaker demand for wireless semiconductors and weigh on sentiment,” Luke stated.
The New York-based firm also spotted warning signs for Texas Instruments as it supplies chips to Nokia, including in low, mid, and high-end handsets, as well as to Motorola in the low-end.
“In wireless semiconductors, lowered guidance from NSM suggests weaker demand in mid- to high-tier handsets, which we believe are the primary segments for NSM's portable power management opportunities. The news presents an uncertain backdrop for core chip suppliers such as Freescale,” Luke said, noting that the company is in the process of going private and that Lehman is acting as a financial advisor to the consortium on the buyout.
“For NSM in particular, we're still not in a rush to buy the stock, given normal seasonal weakness in its February quarter -- but the Street's estimate cuts now make it much more likely that we will see positive estimate revisions as we move through 2007,” FBR’s report added.
National Semi’s stock was falling rapidly in early afternoon trading, dropping from 1 cent to 8 cents between noon and12:15pm eastern time, putting the stock at to $23.87, below Tuesday’s close of $23.95, at the time of this story’s publishing.
