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To: Johnny Canuck who wrote (45212)	12/11/2008 3:01:02 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 72080

National Semi Leads Chip Sector’s Lowered Forecasts by: Sramana Mitra December 10, 2008 \| about stocks: BRCM / NSM / TXN Sramana Mitra Add to Your Watchlist * Bio & more articles * Sramana Mitra on Strategy * Entrepreneur Journeys By this author: Become a Contributor Submit an Article back to yahoo finance add to my yahoo back to cake * Font Size: * Print * Email On Monday, National Semiconductor Corp. (NYSE:NSM) reported a weak second quarter. As the economic conditions deteriorated, it saw demand for its products weaken. It has cut back its forecast and so have leading semiconductor players, Texas Instruments [TI] and Broadcom. Q2 FY09 for NSM's revenue was $422 million, down 15% y-o-y and 9% q-o-q, which is much less than its expectations of $470 million last quarter. Net income was $34 million or $0.14 per share versus $80 million or $0.33 per share last quarter. Excluding charges, EPS was $0.26. Analysts had expected earnings of $0.21 per share on revenue of $427.3 million. Gross margin was 65.6%, down from 66.0% in Q1 mainly and up from 64.4% last year. National Semiconductor bought back shares worth $23 million in the quarter and is now left with $127 million in its funds for stock repurchases. The company ended the quarter with approximately $786 million in cash and cash equivalents, up from $693 million last quarter. During the quarter, total bookings decreased by 33% q-o-q. New order rates declined drastically in the wireless handset market from customers as well as from distributors. Regionally, the bookings decline was most prominent in Asia Pacific and Europe. Mobile phones and devices which account for 30% of its sales was down 10-12% down q-o-q and the usually strong seasonal pick up in demand was missing. In the earnings call, NSM said that sales to the top five mobile phone customers were also down about 15% while sales grew to the two “most visible Smart Phone providers.” National’s power management unit has a design win in Research In Motion's (RIMM) recently released Storm. It also provides the display interface in the 3G iPhone. Communications and networking, which accounts for 12% of business was up about 13% y-o-y, but was flat sequentially. It was driven by infrastructure build out in China and outgrowing wireless station business with the two largest local Chinese customers. The industrial, automotive, medical and military/aerospace markets, which make up about 35-40% of its sales, were down about 10% in the quarter. Sales to automotive customers in Europe were in particular affected by factory shut downs by customers. Wafer fab utilization was about 66% in the quarter and the company plans to bring the idle capacity down further to less than 40% in Q3. Inventories grew by about $6 million in the quarter but NSM expects the inventory to be flat to slightly down in the next quarter. Gross margin is expected to decline to a range of 54-55% in Q3 mainly due to the lower capacity utilization. For Q3 09, NSM expects revenue to be down by about 30% sequentially based on the lower-than-usual demand in the post-holiday season, especially for personal mobile devices. In November, it announced plans to save about $12 million per quarter through reductions in headcount and operating expenses. It is also going for selective shut down and official vacation days. It, however, wants to focus on being a leader in power efficient solutions such as its PowerWise high performance circuits. It is currently trading around $10 after hitting a 52-week low of $9.02 on November 21. Annual revenue is $1.8 billion and its market cap is about $2.3 billion. Chart for National Semiconductor Corp. (<a href='http://seekingalpha.com/symbol/nsm' title='More opinion and analysis of NSM'>NSM</a>) Chipmakers TI and Broadcom also downgraded their revenue guidance. Texas Instruments Inc. (TXN), with annual revenue of $13.8 billion, now expects earnings of $0.10 to $0.16 per share on revenue of $2.3 to $2.5 billion. It had earlier expected earnings of $0.30 to $0.36 per share on revenue of $2.83 to $3.07 billion. It is currently trading around $15 with a market cap of about $19.2 billion. Broadcom Corp. (BRCM), which had annual revenue of $3.8 billion, now expects revenue between $1.05 and $1.1 billion compared to the earlier forecast of $1.17 to $1.25 billion. It is currently trading around $15 with a market cap of about $7.8 billion. Recent earnings coverage for TI and Broadcom is available here. Chart for Broadcom Corp. (<a href='http://seekingalpha.com/symbol/brcm' title='More opinion and analysis of BRCM'>BRCM</a>) Disclosure: None