National Semi Beats, But Lower on Soft Revenue Guidance

National Semiconductor (NSM) gave up most of its earlier 2.5% gain in extended trading Thursday following its fiscal Q2 earnings release, which beat estimates despite a slight decline in net income, but disappointed in terms of Q3 revenue guidance. National's shares fell 2% to $23.05 (and by as much as 4.1%) after closing at $23.51. The company projected current quarter revenues will decline 1% to 5% (total sales between $474M to $494M), against analyst expectations of sales at or just above the high-end of National's outlook. Q2 net income slipped 1% to $90.6M or $0.33/share, topping Street estimates of $0.31/share. Revenues were off by about half a percent to $499M, compared to analysts' average forecast of $498.4M.

A ThinkEquity analyst believes a seasonal slowdown in demand may be exacerbated by cautious resellers of National's chips, who began working on reducing inventory in recent months. National CEO Brian Halla commented in a conference call, "Business just isn't that bad," citing normal seasonal declines, but warned "there is that uncertain but possible effect of the subprime debacle." National is a more than 4% component of the actively traded Semiconductor HOLDRs (SMH), and is a 5%, top-5 holding of the semiconductor ETFs PSI and XSD.

Sources: Press release, Bloomberg, MarketWatch
Additional Reading: Goldman Cuts Estimates, Targets for Slew of Tech Stocks

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