Schlumberger to Write Down $485 Million

Schlumberger, the oil-field services giant that bought Fairchild Semiconductor in 1979, announced Thursday a $485-million write-down for the current quarter stemming from its unprofitable Fairchild unit.

The charge against earnings probably will give Schlumberger a net loss of about $270 million in its fourth quarter, analysts said. But most of the write-down reflects plant closings already made and accounting adjustments resulting from Fairchild’s financial problems.

The company also announced that it will repurchase 8% of its stock, or 25 million shares, over two years, a step that was resisted by Chairman Jean Riboud, who died Oct. 21. Analysts had urged the move to support the stock price in the face of the oil industry slump.

“This is the new guy’s first mark on the company,” said Dallas-based analyst Sam Z. Albright of Kidder, Peabody & Co., referring to the new chief executive, Michel Vaillaud. “This is a change in the mind-set of executives. But I’m surprised they didn’t (decide to) buy more.”

Stock Climbs $2.125

Schlumberger’s stock was the seventh most actively traded on the New York Stock Exchange on Thursday. It closed at $35.125, up $2.125, on trading volume of more than 2 million shares.

Fairchild, founded by semiconductor pioneer Robert Noyce and others in the late 1950s, had diminished in importance in the industry by the time that Schlumberger acquired it for $425 million. Today, hit by a severe worldwide semiconductor slump, the Mountain View, Calif.-based company is a drain on profits.

Schlumberger said $250 million of the write-down is the elimination from the company’s books of the “goodwill”, or intangible assets, of the Fairchild unit. That sum is the difference between Fairchild’s current net worth of $175 million and the original purchase price.

Another $110 million of the charge reflects previously taken steps to slash costs. The remaining write-off of $80 million is to account for unspecified future actions, according to spokesman Seth McCormick.

Schlumberger doesn’t break out earnings for Fairchild. The unit is part of the measurement, control and components division, which accounts for about 40% of the parent firm’s revenue but just 12% of earnings. Despite weak oil prices, Schlumberger earned $1.2 billion last year on $6 billion in revenue.

Before the announcement of the write-down, Albright was forecasting fourth-quarter earnings of about $210 million.