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National Semi stands by estimates
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November 14, 2001: 6:52 p.m. ET
Chipmaker COO sees single-digit growth, is comfortable with earnings targets.
By Staff Writer Richard Richtmyer
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NEW YORK (CNN/Money) - National Semiconductor Corp. remains on track to meet its financial targets for the current quarter, and the chipmaker is seeing some segments of its business picking up, a top executive said Wednesday.
"We guided Wall Street to expect five-to-seven percent sequential growth," Don Macleod, the company's chief operating officer, said in an interview at the Comdex technology convention. "With about two weeks to go, we're very comfortable with that."
In September, the Santa Clara, Calif.-based company reported a fiscal first-quarter loss of $54.6 million, or 31 cents per share, on sales of $339.3 million. The consensus estimate of analysts polled by First Call is for the company to report second-quarter revenue of roughly $357 million, which would result in a loss equaling that it reported in the first quarter.
Like most chipmakers, National's business has been stung by a swift and sudden slowdown in sales and a glut of inventory in the distribution channel. And also like many chipmakers, as well as analysts who track the semiconductor industry, the company has been hard-pressed to determine exactly when a recovery might come.
The semiconductor industry historically has been characterized by boom-and-bust cycles, with periods of tight supply and high demand followed by spells of overcapacity and slumping profitability.
For National, Macleod said the bottom of that cycle came early last summer, and the company has been seeing signs of improvement among certain key areas of its business. "Things are slowly picking up, but I emphasize 'slowly,'" said Macleod, who has been with National for 23 years in a number of roles, most recently as chief financial officer.
National's core business is analog semiconductors, which are used in a whole slew of electronics devices ranging from mobile phones to garage-door openers. The company in recent years also has targeted what it sees as a burgeoning market for "information appliances," which is a term referring to electronic devices other than a PC that can be used to access the Internet.
In fact, National's thrust at Comdex, as it has been at most technology trade shows recently, was around the information appliance, or IA, idea. Its display, one of the largest and most elaborate at the event, was front and center on the convention center floor, showing off a range of devices powered by its Geode line of chips, the centerpiece of its IA strategy.
But IA chips still represent a very small portion of National's overall business, accounting for less than 5 percent of its total sales, according to Macleod.
Macleod said the company's recovery will be led by analog chips used in mobile phones, which represents roughly 25 percent of National's sales, a forecast that echoed one provided by an analyst from technology research firm International Data Corp. earlier in the week.
Analog chips used in displays, accounting for roughly 10 percent of National's sales, also are likely to be at the head of the recovery. However, there remains a big question mark surrounding the PC industry, which accounts for roughly 15 percent of sales, he added.
The PC industry has been among the hardest hit by the slowdown in technology spending, and according to IDC's forecast will be one of the slowest to bounce back. The firm's most recent forecast is for the industry to log a 14.2 percent year-over year revenue decline in 2001, and then another 7.5 percent decline in 2002.
Sales of electronics such as PCs, cell phones, handheld computers and other devices, typically increase in the October-through-December period because of the holiday season, and so far Macleod said National Semiconductor (NSM: Research, Estimates) has been seeing "rational behavior" among its customers.
"Our concern now is where we come out of this after the holiday season," he said. 
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