National Semi’s Severe Guidance Cut (NSM)

National Semiconductor Corp. (NYSE: NSM) reported disappointing second quarter sales and profit for the second quarter after the close.  The chipmaker said that net income fell to $33.9 million, or $0.14 per share.  This is down from $90.6 million, or $0.33 EPS, in the same period last year.  Its revenue fell to $421.6 million from $499 million in the year ago period.

The company was expected to report $0.21 EPS and $427.32 million in revenue, according to the Thomson Reuters consensus numbers. 

National Semi also said that its total bookings fell 33% compared tothe first fiscal quarter, a signal that it is also seeing a drasticdrop off of new orders along with peers.

The company gave some atrocious guidance which was far worse than eventhe most conservative estimates.  It forecast a drop of 30%sequentially in revenue.  That comes to an implied rate of $295.12million in revenue for the quarter ahead.

Analysts were expecting $0.16 EPS and $385 million in revenue, andthose numbers had also been brought down substantially over the last 90days.

The market was braced for bad news, but this guidance is so low that youhave to wonder.  The company said demand was beyond weak from customersand that it would reduce manufacturing.  The company did not forecast any losses on net income, but this is such a sharp drop that you have to wonder.  Approximately one-third of its business is from handset makers, so some of this was known.

Shares had been halted after closing up 0.3% at $10.29 in regulartrading.  Shares re-opened and are now down almost 8% at $9.75 inafter-hours trading.  The 52-week trading range is $9.02 to $24.96.Unlike many peers in tech and chip companies, National Semi does have asubstantial amount of long-term debt.

Jon C. Ogg
December 8, 2008