National Semi cuts 330 jobs on lowered outlook

The layoffs will primarily impact non-manufacturing positions and are part of a company effort to cut operating expenses by $11 million to $13 million a quarter.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 11/13/2008

National Semiconductor Corp has lowered its sales outlook for its fiscal Q2 2009 and announced 330 job cuts as part of an effort to reduce operating expenses.

National reported Wednesday that the layoffs will primarily impact non-manufacturing positions and that remaining resources will be re-prioritized toward the company's most important growth initiatives, including its recently announced initiatives aimed at improving the efficiency of solar energy systems. National currently employs approximately 7,000 people worldwide. 

The company said it now expects sales for its Q2, ending November 23, to be between $420 million to $425 million, or down approximately 9% to 10% sequentially from the $466 million reported in fiscal Q1 2009, which ended August 24. In its Q1 earnings announcement on September 5, National said it expected Q2 sales to be from $470 million to $480 million.

National said the lowered sales outlook is due to a "weakened economy that has led to lower-than-expected shipments to customers in the wireless handset market," which comprised about one-third of National's sales in its Q1.

According to Barclays Capital, National's handset statements could be negative lateral implications for Motorola and possibly Nokia.

"We believe National's revised outlook likely reflects Motorola's lower than expected Q4 [December quarter] unit guidance of 23 million, given the company's plans to reduce its product portfolio behind a major restructuring in its devices business. We had previously modeled 29 million units," Tim Luke, a semiconductor market analyst at Barclays said in a research note this morning. "Nokia on the other hand guided for a 14% sequential unit growth in the handset market in Q4, which now appears quite aggressive given continued order deterioration. We currently model a 10% market unit growth in Q4."

National also noted lower shipments to distributors, which service a large number of customers across a range of industries and markets. Fellow analog company Fairchild Semiconductor also noted distributor inventories when it lowered its December quarter estimates earlier this week.

National further said that the global business environment has "deteriorated significantly" since the beginning of the quarter and that new order rates are currently running at a level significantly below what the company saw in its Q1. That drop off in new order rates has been accompanied by lower-than-expected turns orders and the lower order rates have also resulted in significantly lower backlog for the upcoming fiscal Q3, the company said.

National is targeting to save approximately $11 million to $13 million per quarter in operating expenses from the workforce reduction, of which a large portion should be realized during its fiscal Q3 and the remainder realized in fiscal Q4. 

In connection with the action, National expects to incur approximately $30 million of charges, primarily for severance, most of which will be recorded in Q2.