Chip Maker Warns of Sales Drop
National Semiconductor Corp. Tuesday warned of a drop in fiscal fourth-quarter sales and said it would lay off 10% of its staff, or about 1,100 employees, amid new signs that business has not yet bottomed out.
The company, which issued two prior warnings this year, told analysts that a rebound it had started to notice in March had turned out to be a false start.
“Earlier in the quarter, we had some optimism, and saw the business beginning to climb the stairs,” Chief Executive Brian Halla said during a conference call. “Then just in the last couple of weeks the stair steps took the wrong direction. We started the quarter with much more optimism than we finished it with.”
National Semiconductor said it now expects operating results for the fiscal fourth quarter to come in between a loss of 4 cents a share and break-even. Analysts on average were expecting profit of 4 cents a share, which already showed a steep decline from the 68-cent-a-share profit recorded in the year-earlier fourth quarter.
The latest forecast excludes charges of $25 million to $30 million for the layoffs and other cost cuts, and $10 million to $12 million to write down certain technology investments.
The company also said it expects revenue for its fiscal fourth quarter, which ends May 27, of $390 million to $400 million. Analysts were expecting $427 million, according to First Call/Thomson Financial.
The company said continued high inventory levels, lower overall orders as well as lower turns orders, reflecting orders that are placed and requested for delivery during the same quarter, were all weighing on its results.
It also cited manufacturing consolidations in the cell phone handset market, which it serves, and weakness in the analog phone market.
And, for the first time in recent memory, it said the utilization rate at its plants had fallen to a somewhat alarming level of less than 50%.
The company said the job cuts and other cost-cutting measures it is taking should save about $70 million to $80 million a year.
Shares of Santa Clara, Calif.-based National Semiconductor fell as much as 7% to $23.22 in after-hours trading on the news. The stock, which trades on the New York Stock Exchange, had closed down $1.19 at $25 before the announcement.
