Financial: Semtech Indicates Weaker Demand Affecting Q2

Edge: Work-Group Computing Report, July 13, 1998

Semtech Corp. Tuesday announced that it expects net sales for the second quarter of fiscal 1999, which ends Aug. 2, to be down approximately 15% from first quarter fiscal 1999 net sales.

Net income and earnings per share are expected to be approximately 40-50% lower than in the prior quarter, before one-time charges. In addition, the company announced that it plans to take a one-time pre-tax charge of $2.5 million for restructuring purposes.

Semtech's receipt of turns fill orders (orders received and shipped in the same quarter) for the balance of the second quarter is expected to be affected by weak demand from the personal computer and automated test equipment (ATE) markets. The company also believes that seasonal trends within the electronics industry that normally occur during the summer months have been further aggravated by Asian economic conditions. Despite the weak market conditions, the company remains optimistic about its rate of new product introductions and ongoing commitment to research and development.

The company's announced restructuring charge is for the consolidation of internal wafer fabrication capacity and the related write-off of certain assets. Semtech believes that these steps will provide long-term benefits to improve gross margins, reduce capital expenditures, increase internal capacity utilization and gain access to advanced, cost-efficient processes available at outside foundries.

Jack Poe, chairman and CEO stated, "We currently believe, based on discussions with our customers, that we will not achieve analysts' expectations for second quarter revenues and profits. Although we have received optimistic forecasts from many large customers for second half business, our current view is that the computer market may improve slightly in the third quarter with sustainable growth resuming sometime in the fourth quarter. The ATE market is expected to be flat for the balance of the year, with growth resuming by the first quarter of next year. The communications market segment continues to be fundamentally solid."

Semtech is a leading supplier of analog and mixed-signal semiconductor products used in communications, computer and industrial markets. The company's products address power management, protection, communication and interface applications.