National Semiconductor reported lower Q2 revenue and net income that was in-line with analyst expectations following its preannouncement last month. More disturbingly, it issued weaker Q3 guidance. Q2 net income dropped 20% to $91.4m, or $0.27/share, vs $114.7m, or $.032/share last year, on a revenue decline of 8% to $501.6m vs $544m. Current quarter, Q3, sales are seen coming in 8%-11% lower between $446.3m and $461.3m. A poll by Thomson shows analysts had expected Q3 sales to be off by 1% at $495m. Gross margin fell to 58.9%, compared to 61.7% in Q1, and is expected to be slightly lower in Q3. National Semi's CEO commented, "While customer end demand did not demonstrate the seasonal uptick we usually see this time of year, the revenue decline this quarter was driven by inventory reductions at our distributors and some of our customers." Notable Calls blog posted reaction by Wachovia, which sees greater risk of an economic downturn affecting National Semi, as compared to the down cycle in '04, and expects there will be better entry points for the stock in coming months.
• Sources: Press release, Notable Calls, TheStreet.com, Conference call transcripts: National Semiconductor F2Q07
• Related commentary: National Semi Gives Weak Guidance, Weak Handset Demand Causes Lowered Guidance at National Semi, Merrill Ups Handset Sales Forecasts Believing '06 Could Be Peak Year for Global Sales
• Potentially impacted stocks and ETFs: National Semiconductor (NSM). Competitors: Analog Devices (ADI), Texas Instruments (TXN). ETFs: Semiconductor HOLDRs (SMH), PowerShares Dynamic Semiconductors (PSI)
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