National 4Q net slides, sales dip 9%

Electronic News, June 10, 1996

Santa Clara, Calif.--National Semiconductor Corp. reported 4Q96 net income of $9.1 million, or 7 cents per share, versus $81.2 million, or 59 cents per share, for 4Q95. Sales for the quarter ended May 26, 1996 fell 9 percent to $612.4 million from $669.8 million.

Analog and mixed-signal sales, led by growth in local area networks and wireless telecommunications products, represent 62.1 percent of the company's 4Q96 sales versus 57.5 percent a year ago.

National also reported net income for the 12 months ended May 26, 1996 of $185.4 million, or $1.34 per share, compared with $264.2 million, or $1.92 per share, in FY95. Revenues for the year grew 10 percent to $2.6 million from $2.4 million.

The company said continuing inventory corrections in the PC market and the distribution channel resulted in lower than expected revenues and decreased factory utilization. The latter reduced gross margins and profitability in 3Q96 and 4Q96. Steps were taken to align costs with current market conditions, and benefits of the actions are expected in the coming quarter.

Also noted was a one-time pretax charge in the quarter of $19.3 million, or 10 cents per share, primarily for severance packages linked to cost-containment programs. Earnings per share (EPS) for the same quarter last year included a net 7 cents per share in one-time income from intellectual property and a charge to interest expense from early retirement of debt.

National recently saw signs of improvements in both the PC market and the U.S. distribution channel, but added that the outlook "remains cautious." Increased activity from PC manufacturers is expected to continue through the summer as they work off existing inventory, National said, adding that distributors are continuing to reduce inventories, which are still above normal levels.

Worldwide bookings rose slightly in 4Q96 compared with 3Q96, "but less than the normal seasonal expectation." Overall worldwide orders were down from last year.

The wireless telecom market continues to lead the company with order growth that doubled 3Q96 levels, "making this one of the few markets to increase significantly compared with last year." PC markets were said to have improved as orders for proprietary Super I/O devices more than doubled compared to 3Q96. However, "overall orders from the PC markets remain approximately 40 percent below last year, as customers complete their recent inventory corrections." Orders from automotive customers, led by single-chip mixed-signal solutions, continued to show seasonal improvement over the winter quarter and were only slightly below last year, National noted. Bookings from U.S. distributors continued to weaken, as they further decreased their inventory on hand in proportion to shorter lead times from National and other semiconductor manufacturers, the company said.

On a regional basis, order declines in North America were more than offset by improvements in Europe and Japan, while bookings in the Asia/Pacific area were said to have remained even with 3Q96. Orders in all regions declined significantly from last year's "unusually strong" fourth quarter, it was noted.