National Semi reduces 3Q estimates again

2 min read

National Semiconductor (NYSE: NSM) cut its third quarter target for the second time.

After market close Thursday, the maker of chips for computers and communications said it now sees third quarter earnings of 20 cents to 22 cents per share, on revenue of $475 million to $480 million.

Analysts surveyed by earnings tracking firm First Call were predicting a profit of 31 cents per share on revenue of $558.4 million for National Semiconductor's quarter ending Feb. 25.

Shares of National Semiconductor traded at $25.50 in afterhours activity on the Island ECN, immediately following the news. National Semiconductor fell $1.39 to $27.31 in Thursday's regular trading ahead of the third quarter preannouncement.

Gross margins could fall into the 47 to 48 percent range because of lower factory loadings, the company said. National Semiconductor reported a gross margin of 50.5 percent in the second quarter.

Company executives blamed the third quarter letdown on fewer orders slated for same-quarter delivery. National Semiconductor sees uncertain demand and a glut of product among its distributors, and in PC and wireless handset markets.

"These slow turns clearly tell us that our customers and the channel are still working through their inventory reductions," CEO Brian Halla told analysts during a Thursday afternoon conference call.

The company's disappointment comes on the heels of disappointing near-term forecast from the largest cell phone maker, Nokia, (NYSE: NOK) and an announcement from another wireless giant, Ericsson (Nasdaq: ERICY), which plans to stop making handsets.

"The number of handset sales expected by many of our key customers in the fourth quarter (of calendar 2000) did not materialize," Halla said, adding that some of the company's largest clients still have weeks of components to work with.

The PC market is even more uncertain. "There it's not so much inventory as a softness in demand and the whole Christmas market not materializing," Halla said.

About 50 percent of National Semiconductor's business in the previous quarter came from makers of PCs, wireless handsets, and imaging devices such as printers, displays and scanners.

Technology distributors -- who generated about 30 percent of the company's second quarter business -- remain the most difficult field to predict, executives said.

"I think our distributors don't have enough visibility about resale activity going forward," said Donald Macleod, National Semiconductor's CFO.

The company plans to cut its capital spending for the remainder of its fiscal year, which ends in May. The company now expects $275 million of capital spending for the year, down from an earlier target of $350 million, Macleod said.

Thursday's announcement marks the second time the chipmaker has reduced third quarter expectations. National Semiconductor first lowered third quarter estimates on Dec. 7, when the company reported second quarter results.>