The company's stock plummeted on the warning, which came after the end of regular trading. National Semi's shares closed at $36.94 and then plunged to $24 in after-hours trading, according to the Island ECN trading network.
National Semi, which makes analog chips used in cell phones and other gear, said both sales and earnings for the quarter ending Nov. 26--as well as the next quarter--may be below both last quarter's figures as well as Wall Street expectations. The company said sales may drop 6 percent to 8 percent below last quarter's $641 million.
The company blamed inventory corrections being made by some of its customers in the mobile phone market and, to a lesser degree, slowness in the PC market for the disappointing results.
National Semi's warning comes after a summer of shrinking forecasts for the cell phone industry. On Friday, Ericcsson said its sales and profits would be lower than originally forecast because of struggles in the handset market. Texas Instruments also trimmed its outlook last week, saying its sales might taper off this quarter amid an excess inventory in the handset market.
National Semi also expects gross margins to fall 2.5 percent below last quarter's 53 percent level, meaning a further hit to earnings. Last quarter, the company posted earnings of 76 cents per share. Analysts had been expecting National Semi to post earnings of 77 cents a share this quarter, according to First Call/Thomson Financial.
"Bookings for personal computer products have strengthened, but at a lower rate than seasonally expected," the company said in a statement.
National Semi said it expects growth to resume in the December-February quarter, although sales and earnings may still be below those in June-August quarter.
"It's another shoe to fall," said Salomon Smith Barney analyst Jonathan Joseph, who warned in July that industrywide chip shipments would slow--a prediction that reportedly led to death threats.
National Semi had been assuring investors as recently as a month ago that the worst of the wireless glut was behind them, Joseph said.
"I don't think the market has picked up as they hoped," said Joseph, noting that National Semi's warning could have negative implications for the whole chip sector.
The company will hold a conference call with analysts Tuesday morning to discuss the warning.