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National Semiconductor beats estimates

Strong sales of wireless and analog chips allow the chipmaker to post quarterly earnings that easily surpass analysts' expectations.

Strong sales of wireless and analog chips allowed chipmaker National Semiconductor to post quarterly earnings today that easily surpassed analysts' expectations.

Excluding a one-time gain, the company said it earned $134.2 million, or 68 cents per share, on revenue of $595.3 million for the quarter ended May 28. In the same quarter a year ago, National lost $40 million, or 24 cents a share, on revenue of $486 million, excluding one-time charges. The year-ago figures exclude sales from the Cyrix PC processor business, which was sold to VIA Technologies in September 1999.

Analysts had been expecting National to report earnings of 62 cents per share, according to the consensus estimate from First Call.

"Now we know we are in the right markets, with the right products and the right customers," National chairman Brian Halla said in a statement.

Merrill Lynch analyst Joe Osha said before the announcement that his official guess was that National would earn 60 cents per share, but he said sales of 62 cents or 63 cents would be reasonable and projected sales could reach $600 million.

Including the gains, mostly related to the spinoff of Fairchild Semiconductor, National reported net income of $153.9 million, or 78 cents per share, for its fiscal fourth quarter.

National said in a conference call with analysts that it expects to boost sales 6 to 8 percent in the current quarter over last quarter, thanks to strong new orders. Bookings were up nearly 40 percent over last year's fourth quarter and more than 20 percent over this year's February quarter.

Chief financial officer Don Macleod also forecast that National will grow its gross margins in the current quarter to 52 percent, up 1 percentage point from the May quarter and 4 points from the February quarter. However, Macleod cautioned that National may see a slowdown in order growth in the coming quarter due to the traditional summer lull.

Halla also told analysts that National is seeing growing sales and design wins for its Geode chip for Internet appliances. National said it is now in volume production on a Phillips/AOL TV set-top box that uses the Geode and said Hewlett-Packard is about to introduce a Web pad using National chips. Halla added that National is working with another Top 5 computer maker interested in using the Geode.

Some of National's improved profit margins come from greater use of its manufacturing plants. Overall, National said it is at 90 percent capacity, with its South Portland, Maine, fabrication plant now at 77 percent utilization. National had once looked to unload the plant but now says that even finding a partner is not essential.

"The worldwide semiconductor industry is currently enjoying phenomenal growth in analog products," Halla said. "We believe our analog focus and our ability to execute will result in an even stronger fiscal 2001."

National shares closed down 1.75 percent, to $63, after the announcement.