Chipmaker National Semiconductor Corp. (NSM) is slated to release its first-quarter earnings results after the market's close Thursday. The Santa Clara, California-based company expects first-quarter net sales to be in the range of $285 million to $305 million, an increase of about 2% to 9% over the fourth quarter level.
On average, 22 analysts polled by Thomson Reuters expect the company to post earnings of $0.07 per share for the quarter, with estimates ranging between $0.00 and $0.10 per share, in comparison to prior year's earnings of $0.33 per share. Analysts' estimates typically exclude special items. Further, nineteen analysts have a consensus revenue estimate of $300.48 million, representing a 35.5% fall from last year's sales of $465.60 million.
Over the last year, chipmakers were struggling with falling global demand for chips due to a sharp pull back in consumer spending in light of the global recession. However, the market is currently experiencing a slight improvement in demand.
The Semiconductor Industry Association, or SIA, on August 31 reported that worldwide sales of semiconductors in July were $18.2 billion, down 18.2% from July 2008, while the sales were up 5.3% from the preceding month of June. SIA noted that the year-on-year rate of decline has moderated as the year has progressed, and that the first six months of 2009 saw an average monthly year-on-year decline of approximately 25%. SIA also noted that month-on-month sales increased in all geographic sectors in July.
SIA President George Scalise stated, "The fifth-consecutive month of sequential increases in semiconductor sales reflects improving demand in the consumer sector. Sales of consumer products such as notebook PCs and cell phones are supporting the modest recovery in demand that is now under way. Purchases of Information Technology products by the enterprise sector continue to be tempered by caution and longer replacement cycles. There is also evidence of a return to seasonal industry patterns."
In early August, SIA reported that worldwide sales of semiconductors for the second quarter of 2009 were $51.7 billion, down 20% from the $64.7 billion reported last year, but increased 17% from the preceding first quarter when sales were $44.2 billion. Year-to-date sales of $95.9 billion were 25% below the first six months of 2008, when sales were $127.5 billion. According to Scalise, the industry analysts have recently become more optimistic in their forecasts for key demand drivers.
SIA then noted that economic stimulus programs in China, including incentives for purchasing consumer products and investment in 3G/TDSCDMA communications infrastructure, resulted in the drive for semiconductor sales in the world's largest chip market.
Scalise then said, "The global macroeconomic environment remains the key factor in determining the timing and rate of recovery for the semiconductor industry."
Founded in 1959, National Semiconductor designs, develops, manufactures, and markets analog and mixed-signal integrated circuits and sub-systems. The company has a product portfolio of power management circuits, audio and operational amplifiers, analog-to-digital or digital-to-analog converters, communication interface circuits, and lighting and display circuits, among others.
In its preceding fourth quarter, National had reported net loss of $63.7 million or $0.28 per share, compared to net income of $83.2 million or $0.34 per share in the corresponding period last year, hurt by lower sales as well as severance and restructuring costs. Net sales for the fourth quarter fell 39% to $280.8 million from $462.0 million in the same quarter last year. Gross margin decreased to 58.3% from 65.9% in the prior year quarter.
The company previously had said that it would take actions to reduce overall expenses and shift more of its R&D investments towards new and emerging growth opportunities, under which about 850 positions would be reduced worldwide in product lines, sales and marketing, manufacturing and support functions. The company said at that time that it would also close its assembly and test plant in Suzhou, China, and its wafer fabrication plant in Arlington, Texas. The closures were expected to occur in phases over several quarters, eventually resulting in the elimination of an additional 875 positions, resulting in the elimination of 26% of its workforce.
National's bigger rival Texas Instruments Inc. (TXN) on Wednesday raised its earnings and revenue outlook for the third quarter, which is a clear sign of improving global demand for chips. The world's second largest maker of mobile phone chips raised its third quarter earnings guidance to a range of $0.37 to $0.41 per share from its previous guidance of $0.29 to $0.39 per share. The Dallas, Texas-based company now expects third-quarter revenue to be in the range of $2.73 billion to $2.87 billion, compared to its prior outlook of $$2.50 billion to $2.80 billion. Analysts currently expect the company to earn $0.35 per share on revenue of $2.69 billion for the third quarter.
Texas Instruments' announcement follows that of Intel Corp. (INTC), the world's biggest chipmaker, which late last month raised its third-quarter revenue outlook, citing stronger-than-expected demand for its microprocessors and chipsets. Santa Clara, California-based Intel then said it expects third-quarter revenue to be $9.00 billion, plus or minus $200 million, up from its earlier forecast of $8.50 billion, plus or minus $400 million, while analysts currently expect revenues of $8.96 billion.
Among other peers, Analog Devices Inc. (ADI) on August 18 reported that its third-quarter net income fell to $65.6 million or $0.22 per share from $138.6 million or $0.47 per share in the prior year, on lower gross margins and lower demand for chips, reflecting the economic crisis restricting consumer spending. Adjusted earnings, however, exceeded Street expectations by 2 cents, aided by continuing inventory reductions and control on operating expenses. The Norwood, Massachusetts-based chipmaker's non-GAAP earnings from continuing operations dropped to $0.22 per share from $0.44 per share in the year-ago quarter. Third-quarter revenue declined 25% year-over-year to $492 million, and gross margin decreased to 54.1% from 61.0% in the year-ago quarter.
In early August, Maxim Integrated Products Inc. (MXIM), a semiconductor product company, reported a fall in fourth-quarter profit to $8.1 million or $0.03 per share from $66.05 million or $0.20 per share last year, hurt by one-time items and a decrease in revenues. Quarterly revenues declined to $394.5 million from $501.27 million in the prior year period.
Tunc Doluca, president and chief executive officer of Maxim, then said, "Due to market share gains, our revenue performance versus the same quarter last year is better than our peers. We remain convinced that our balanced business model of serving all four major markets, and our continued strategy of driving innovation and integration uniquely position us for profitable growth in the analog and mixed signal market."
For the September ending first quarter, Sunnyvale, California-based Maxim expects revenues in the range of $415 million to $445 million, with a gross margin of 53% to 56%. Wall Street currently expects revenues of $433.36 million.
NSM, which has been trading in a range of $9.02 to $18.65 for the past 52 weeks, is currently trading at $15.69, down $0.03 or 0.13%, on a volume of 2.54 million shares.
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