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National Semi tops forecast
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September 7, 2000: 2:12 p.m. ET
Chip maker credits analog sales, manufacturing efficiencies for upside
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NEW YORK (CNNfn) - National Semiconductor Corp. reported a fiscal first- quarter operating profit Thursday of 76 cents per share, beating Wall Street's expectations by 11 cents.
Excluding one-time items, the chip maker said it earned $149.4 million during the period ended Aug. 27. Analysts polled by earnings tracker First Call had expected the company to post a profit of 65 cents per share during the quarter.
Revenue for the quarter rose to $641 million from $482 million a year earlier.
Including $6.4 million in pretax special items, National reported a net income of $144.2 million, or 74 cents per share. In the year-earlier quarter, the company reported net income of $47.1 million, or 25 cents per share.
Although National's revenue for the quarter was in line with its forecasts, at 53 percent, the company's gross margin was higher than it had expected. Executives at National in Santa Clara, Calif., said the quarter's upside surprise came largely from improvements it made in its manufacturing processes.
 "We are ahead of our gross margin goals and we are continuing in the same direction," Brian Halla, the company's chief executive, told analysts during a teleconference Thursday afternoon.
Booking for National's analog semiconductors -- which are used to convert real-world signals such as audio and images into a digital format -- rose 30 percent over last year, the company reported. Analog chips represented 72 percent of sales during the quarter.
"It's one thing to put this business on the books," Halla said. "It's far more important to maximize the profit from it."
Don Macleod, National's chief financial officer, said about half the company's gross margin for the quarter was driven by higher volume, and the other half was from higher manufacturing efficiencies.
Looking ahead, Macleod said National is on track to post sequential sales growth of 6 percent-to-8 percent for the quarter ending in November. "Our overall backlog is where it should be to validate this kind of revenue assumption," he said.
Gross margins in the current quarter should improve another 40-to-50 basis points (0.4 percent-to-0.5 percent) as the company continues to consolidate its manufacturing operations, Macleod said.
For all of fiscal 2001, Macleod said National is on track to post year-over-year sales growth in the mid-30 percent range. Continued increases in gross margin should offset ongoing increases in research and development spending and other expenses and result in improved earnings for the year, he said.
National (NSM: Research, Estimates) shares gained $1.31 to $45.81 in Thursday afternoon trading. 
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