NatSemi Shares Leap as Results Beat Forecasts

Analog chipmaker National Semiconductor on Thursday posted a lower fourth quarter net profit, but revenues and earnings topped expectations as it sold more profitable chips, and shares jumped.

National Semiconductor
National Semiconductor

Shares of National Semiconductor were up more than 6 percent Friday.

The company also said that orders in the just-reported quarter rose 12 percent from the prior period and were driven by higher orders from the distribution channel and higher bookings for wireless handsets and other personal mobile devices.

"They've done well given all the head-winds in the handset markets with excess inventories earlier in the quarter, especially in China," said Tayyib Shah, an analyst with Longbow Research.

"It seems like their handset business is coming back." National Semiconductor, whose microchips are used in everything from cars to cell phones and in the aerospace industry, said net income for its fourth fiscal quarter declined to $83.2 million from $90.1 million.

Per share earnings rose to 34 cents a share, on fewer shares outstanding, from 28 cents a share a year ago.

Revenue rose to $462.0 million from $455.9 million.

Per-share results topped analyst expectations of 27 cents per share and revenue topped estimates of $449.5 million, according to Reuters Estimates.

"It looks like we weathered through the bottom of the cycle pretty well," said Chief Executive Brian Halla on a conference call to discuss the quarterly results.

When National last reported results in March, it forecast sales for the fourth quarter of $440 million to $460 million, a range that Halla told Reuters should be achievable.

"I could see it going above the high end of the range," Halla told Reuters in March when it reported third-quarter results.

"The last thing I could see happening is going below the low end of the range." On April 29, National Semi said that it was cutting 130 positions.

It took a charge in the fourth quarter of $9 million before taxes related to severance and the results also included about $6 million in tax benefits.

"Handsets have always been pretty stable and we've seen strength that's been steadily improving," Halla said by telephone, noting that weakness in January was related more to specific phone models National Semi's chips went into rather than fundamental weakness in that industry.

Halla also said that Asia continues to be National Semi's fastest growing market, particularly China, although Japan is still a "bit lackluster, but that's been the case for some while." For the current, first quarter, National said it expects revenue of $460 million $475 million.

Analysts currently expect first-quarter revenue of $451.4 million.

"If oil on the other hand hits $200 a barrel your guess is as good as mine," Halla said on the call.

National Semi also expects earnings per share in fiscal year 2009 to increase 15 percent to 20 percent from fiscal 2008, due to an ongoing reduced share count, helped by stock buybacks, cost reductions and revenue growth, said Chief Financial Officer Lewis Chew on the conference call.

Chew also said he expects first-quarter gross margin in a range of 65 percent to 66 percent.

The company's fourth-quarter gross margin -- percentage of revenue remaining after subtracting product costs -- widened to 65.9 percent from 64.3 percent in the previous period and from 62.5 percent in the year-ago quarter.

"Business conditions improved in the quarter, and we were able to turn this into higher gross margins," Halla said in a statement on Thursday, noting that the sequential improvement was paced by strong manufacturing performance, cost efficiencies and an improved mix of higher-priced analog chips.

"It seems like the bottom is behind them," Shah said.