National Semi beats estimates, guides for revenue gains

Suzanne Deffree, Managing editor, news -- EDN, June 11, 2010

National Semiconductor Corp Thursday afternoon reported fiscal Q4 results that beat Wall Street estimates and showed significant gains.

The analog maker reported sales of $398.5 million, up 10% from fiscal Q3 and up 42% from fiscal Q4 2009. Street estimates had called for sales of $384 million. The company noted increased sales of its analog and power management products to the personal mobile device and industrial markets as sources for the boosted revenues in the quarter ended May 30. 

"Looking at the trends by end markets, our sales to the industrial market grew by 11% over Q3 and accounted again for about 45% of sales," said Don Macleod, National's president and CEO, on a conference call discussing the results. "Our sales to the next most significant end market for us, mobile phones, grew sequentially by about 12% over Q3. Our sales to our third largest end market, communications and networking, at about 12% of our overall sales, grew sequentially at 5%, which is less than the overall company and was driven by a slower quarter of sales to China-based communications infrastructure companies. These three areas accounted for about 82% of our overall sales."

As to product areas, Macleod said, "When I look at our product view of what drove our growth in the quarter, our largest product area, which is power management products at 47% of our sales, grew sequentially by 11%. Our amplifier products also grew by 11%, and represented 24% of our sales. Both, again, very close to the overall company [10%] growth rate."

Macleod continued to note that total company bookings increased 12% quarter over quarter.

Net income of $79.2 million, or 33 cents per diluted share, was an increase from the $53.2 million, or 22 cents per diluted share, National reported in its fiscal Q3. In the year-ago quarter, National reported a net loss of $63.7 million, or a net loss of 28 cents per diluted share, which included $116.1 million of pre-tax charges primarily for severance and asset impairments related to a corporate restructuring.

National's gross margin increased to 68.8% in its fiscal Q4. The company attributed the gains to improvements in manufacturing cost performance and increased capacity utilization. National reported gross margin of 67.3% in the prior quarter and 58.3% in the year-ago quarter.

Craig Berger, a semiconductor industry analyst at FBR Capital Markets, remained neutral on National in a research note this morning, however he cautioned that the company "is likely still losing share in wireless analog" and that "the firm may soon see an increasing impact from TI's 300-mm analog manufacturing strategy." Berger, as well as other industry watchers, have recently cheered TI's analog plans and recently opened 300-mm analog fab, saying it will accelerate TI's competitive position in analog.

Looking to the current quarter, National is projecting fiscal Q1 2011 revenues to increase 3 to 5% sequentially to be between $410 million and $418 million. Macleod said he expects the wireless handset and industrial end markets to drive more revenue growth opportunities for the company's analog, and in particular, power management products in the quarter.

Berger was positive on National's forecasted gains for the current quarter. Looking further out, he noted future growth opportunities that the company is exploring. "Looking forward, National discussed two new growth initiatives: LED lighting and solar energy efficiency products," Berger's report said. "In terms of dollar volume, these segments are small now; however, they are growing strongly in percentage terms."

For fiscal 2010, National reported sales of $1.42 billion and net income of $209 million or 87 cents per diluted share. In fiscal 2009, National reported sales of $1.46 billion, GAAP net income of $73 million or 31 cents per diluted share. Gross margin of 65.9% in fiscal 2010 improved from fiscal 2009's gross margin of 62.7%.