9/7....NSM Profits Rise
By Duncan Martell
PALO ALTO, Calif. (Reuters) - Chipmaker National Semiconductor Corp.(NYSE:NSM - news), spurred by improved manufacturing operations and a buoyant semiconductor market, reported on Thursday better-than-expected fiscal first-quarter income of $149.4 million before special items.
The company, one of the biggest makers of chips for mobile phones, earned 76 cents per diluted share before special items that included restructuring expenses and write-offs for research and development. That compared with 25 cents per diluted share, or net income of $47.1 million, for the same year-earlier period.
Financial analysts had expected the company to post earnings of 65 cents per share for the quarter, according to a consensus of estimates from investment research firm First Call/Thomson Financial. Including the one-time items, the company earned $144.2 million, or 74 cents per diluted share, for the quarter ended Aug. 27.
Chairman Brian Halla, who has led the venerable Silicon Valley chipmaker for four-and-a-half years, said the company four years ago put in place a strategy to combine systems previously performed by several chips onto one for trend-setting data-highway customers. With the surging growth of the Internet, mobile phones and information appliances, that strategy appears to be paying off.
``I think they had a great quarter and hope this would help to build investor confidence,'' said analyst Mark Edelstone at Morgan Stanley Dean Witter, who rates the stock ``strong buy'' and has a 12-month price target of $110. ``Their execution has been quite good for the past year.''
Suffering Chip Stocks
National Semiconductor rose $2-5/8 to close at $46-13/16 in trading on the New York Stock Exchange. That was well below the stock's year high of $85-11/16 but was nearly twice the year low of $23-1/2.
Many chip stocks have fallen from yearly or record highs in recent months as some analysts have argued that the historically cyclical semiconductor industry is close to reaching its peak. National Semi, in particular, has also been hurt by concerns over whether sales of mobile phones will be as strong as had been forecast.
``We've become much more customer-focused and much more of a manufacturing entity and we're in the right markets,'' Halla said in an interview. On a scale of 1 to 10, Halla rated his company ``modestly at an 8 or 9 and the only reason I don't say 10 is because I want employees to know we've still got lots of work to do.''
Edelstone also said that the sell-off in National Semi stock has been extreme. ``On the wireless concerns, the fall in the stock was absolutely overdone; this is one of the most attractive stocks in the group right now,'' he said.
Strong Second Quarter Seen
Due to the continued demand for National's chips used in cell phones and a growing array of wireless devices that connect to the Internet, National said it expects second-quarter sales to rise 6 percent to 8 percent above first-quarter levels and to climb more than 30 percent over last year's second quarter.
National Semi executives told analysts in a conference call that its chips and products for information appliances now account for 10 percent of total sales. The executives said results were largely driven by increased unit sales as prices remained stable. Roughly 72 percent of its sales come from so-called analog chips, which help the real world of sound and light connect with the digital world of ones and zeros.
The company attributed the strong first-quarter earnings to improved operating efficiencies at its plants and the targeting of markets like wireless communications and Internet appliances for its analog and mixed-signal semiconductors.
Halla said that their customers are telling him that they believe 420 million to 430 million mobile phones will be sold this year, rising to 600 million to 650 million in 2001.
``It's looking pretty good for a market that was only 270 million phones last year,'' Halla told analysts on the call.
Halla also said that, for the past 20 years, roughly 50 percent or more of the chip market had been driven by personal computers, with rival chipmaker Intel Corp. (NasdaqNM:INTC - news) and Microsoft Corp. (NasdaqNM:MSFT - news) being prime beneficiaries.
That's not so true anymore, Halla said.
``What's happening now is the market's being driven by much greater forces and that includes the Internet,'' he said. ``If the PC business does slow down it's not such bad news for the whole industry. |
