With this revised forecast, National Semiconductor now expects fourth quarter revenues of approximately $390-$400 million.
Market conditions for National’s customers are impacting orders and shipments in the fourth quarter. Sales are also being affected by lower than expected turns orders, continued high inventory levels and manufacturing consolidations in the cell phone handset market, and weakness in the broad analog market through the distribution channel. Turns orders are customer orders requested for delivery during the same quarter.
In response to these business conditions, the Company is refocusing its resources in order to position itself for anticipated growth opportunities in the market. At the same time, the Company is implementing a strategic cost-reduction program that addresses the reduced levels of demand. On an annual basis, these activities are expected to save National approximately $70-$80 million.
Due to lower factory loadings in the fourth quarter, the Company now expects to achieve gross margins of approximately 41-42 percent for the quarter. The Company’s pro forma net results for the fourth quarter, excluding goodwill amortization, special charges of $25-$30 million for the cost reduction program and $10-$12 million for investment writedowns, may range from a loss of 4 cents per share to break even. National will report fourth quarter earnings on June 7.
The cost-reduction program will include elimination of approximately 1,100 positions, or approximately 10 percent of National’s global workforce, during the fourth quarter. This action will affect 800 fulltime employees and 128 contractors, and be achieved through a combination of layoffs, attrition and retirements. All affected employees will receive complete severance benefits including pay, medical and dental benefits, and outplacement services.
This was a tough action for us to take, especially because it impacts many people who have served National well, said Brian L. Halla, National’s chairman, president and chief executive officer. However, given the continuing weakness in the marketplace, it is necessary to conform our resources to the market in order to maximize National’s opportunity for longterm success.
