National Semiconductor Corp posted better than expected first- quarter results Thursday as increased demand for the company’s communications processors helped return it to profitability ahead of schedule. The Santa Clara, California-based chipmaker posted net income of $47.1m on revenue up 2.6% year-over-year at $481.8m, compared to a net loss of $104.8m in the year-ago quarter. Earnings per share came in at $0.25.
The bottom line was boosted, however, by $57m in other income which included a one-time gain of $48.4m from the sale of Fairchild Semiconductor stock. NatSemi says it sold 3 million shares of Fairchild, which went public during the quarter, and holds another 7.3 million shares. Excluding the investment gain, NatSemi posted a pre-tax profit of $1.2m, or less than $0.01 per share, compared to an anticipated operating loss of $29m. Analysts surveyed by First Call were expecting a net loss of $0.14 for the quarter.
The quarter was driven by improved overall market conditions and better-than-expected bookings. Overall bookings rose 125 over the year-ago quarter despite negative bookings for the now discontinued Cyrix PC processors. Excluding the Cyrix business, bookings grew 38% year-over-year. The growth was fueled largely by the company’s analog business, which has enjoyed continued strong sales to makers of mobile phones.
NatSemi says orders for analog chips rose 57% from the year-ago period and adds that seven of the world’s top handset suppliers are among its top 12 customers company-wide. The analog business accounted for 69% of total revenue, up from 59% a year-ago, while information appliances brought in 12% and other products – mainly for the aerospace and military markets – amounted to 16%. Cyrix chips represented just 4% of overall sales. Gross margin for the quarter was 38.4%, up 7% sequentially and more than three times the year-ago quarter’s 11.7%.
Looking ahead, backlog at the start of the current quarter was up 10% sequentially. This was the quarter in which NatSemi had anticipated its long-awaited return to profitability after what would have been six consecutive quarterly losses, but the strong showing in the first quarter made that happen earlier than expected. Executives say the company is now where it wants to be after having taken a huge financial hit to restructure and instituted company-wide cost controls.
In last year’s fourth quarter, NatSemi took a one-time net restructuring charge of $688.4m stemming from the previously- announced decision to exit the standalone Cyrix PC processor business and to sell a majority interest in an 8-inch wafer manufacturing facility. The Cyrix operation was sold to Taiwan’s Via Technologies in June for $167m. The deal closed last Friday and, going forward, there will be no Cyrix revenue included in the company’s financials. Cyrix sales amounted to $19m in the first quarter and the unit booked a $25m loss.
The restructuring also saw the elimination of 550 jobs and resulted in a $5m cost reduction in the first quarter. A further cost savings of between $10m and $15m per quarter is expected from the current quarter on. Second-quarter revenue is expected to grow 7% to 9% from the first quarter’s $463m, excluding Cyrix. Gross margins should be in the low 40% range and hit the high 40s by the end of the year. Another near-term benefit to the bottom line comes from NatSemi’s tax situation, which will see it hold a 5% tax rate for the rest of this fiscal year and all of 2001. The negligible tax hit will come solely from international operations, as the US tax rate is effectively zero due to what are known as tax benefit ‘carry-forwards.’
