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National Semi sails past earnings estimates

Buoyed by stronger-than-expected profit margins, the chipmaker blows past earnings estimates and forecasts continued growth.

Buoyed by stronger-than-expected profit margins, chipmaker National Semiconductor today blew past earnings estimates and forecast continued growth.

Excluding special items, National Semi reported net income of $149.4 million, or 76 cents per share, on revenue of $640.8 million for the quarter that ended Aug. 27. Including $6.4 million in pretax special items, earnings were 74 cents per share. In the same quarter last year, National Semi reported net income of $47.1 million, or 25 cents per share, on revenue of $481.8 million.

Analysts were expecting National Semi to report earnings of 65 cents, according to the consensus estimate from First Call/Thomson Financial. Merrill Lynch analyst Joe Osha said in a report this week that he expected revenue of $636 million, up 7 percent from last quarter.

"We had another good quarter as we continued to show sequential growth through the summer," National Semi CEO Brian Halla said in a conference call with analysts.

Last quarter, National Semi reported it earned $134.2 million, or 68 cents per share, on revenue of $595.3 million. At the time, the company forecast sales growth of 6 to 8 percent as well as a slight improvement in gross margins.

Although revenues came in within the range of the company's guidance, National Semi reported that its gross margin rose 2 percentage points from last quarter to 53 percent, ahead of its earlier forecast of 1 percentage point.

"It's one thing to put the business on the books," Halla said. "It's far more important to maximize profit from it."

Santa Clara, Calif.-based National Semi said it sees another 6 to 8 percent sequential sales gain in the current quarter. Continued increases in profit margins should offset increasing research costs and other expenses, leading to further earnings gains as well, National Semi said.

At the end of regular trading, the company's shares were up $2.94, or nearly 7 percent, to $47.44 on a volume of 7.7 million shares.

The company, which supplies chips to wireless phone makers, said it continues to see worldwide handset sales in the range of 420 to 430 million units this year.

"Yes, we had some significant adjustments from a couple of key customers during the quarter," Halla said. However, he added, "it felt to us like a shifting of market share."