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Slow sales hit National Semi

National Semiconductor's stock sinks to a new year low as it will likely record a wider-than-expected loss for the quarter.

National Semiconductor's stock sunk to a new year low today as the company announced it will likely record a wider-than-expected loss for the current quarter due to slower-than-expected sales across its product lines.

In also announcing that it may see another loss in the subsequent quarter, National effectively is stating that the company's financial straits are taking a turn for the worse.

The stock dropped more than 9 percent to 18.88, down 1.94 from yesterday's close of 20.81.

When National reported its results for the quarter ending March 1, it warned of falling revenue with the likelihood of a loss in the next reporting period.

The current quarter, however, is not going as well than expected, according to Alan Bernheimer, a National spokesman.

On March 12, the company announced that it would be laying off around 1,400 employees--approximately 10 percent of its workforce--as a result of weaker-than-expected demand for its analog processors and manufacturing setbacks at Cyrix, its microprocessor subsidiary. At the time, National said an operating loss for the current fiscal quarter, which ends in May, was likely.

Disappointment is increasing because of a decline in sales of processors for motherboards and chips for Ethernet networking cards, said Bernheimer. Sales of motherboard chips have slowed because of a surfeit of PCs, he added. By contrast, National's Ethernet chip business has stalled because the company missed a product cycle.

The company expects sales for the fourth quarter ending in May to decline by as much as 20 percent from the same year-ago period, resulting in an operating loss. In the fourth quarter of last year, the National-Cyrix combination reported pro forma revenues of $651.7 million.

National said that with the current limited visibility of first-quarter demand, it may also see an operating loss in that fiscal quarter, ending August 30.

Despite the setbacks, Bernheimer stated that the worst is behind the company.

While customers indicate that they expect to wrap up inventory corrections in their June quarter, current order rates have not yet reflected that improvement.

In addition to the PC inventory correction, product transition issues affecting the company's local area network business will continue into the summer and may not be completed until the launch of National's new 3.3-volt Ethernet networking products in the fall, the company added.

National noted that analog shipments have shown improvements but not enough to offset other market uncertainties.