Monday, March 30, 2009

National Semiconductor annoucement

National Semiconductor Corp has announced plans to cut 1725 jobs and consolidate its manufacturing operations as it looks to reduce overall expenses and shift more of its R&D investments toward new and emerging growth opportunities.

The company made its announcement today as it reported on its fiscal Q3 ended March 1. The quarter saw sales of $292 million and net income of $21.1 million, or 9 cents per diluted share, drop significantly from fiscal Q2 sales of $422 million and $36 million in net income, or 16 cents per diluted share.

Year over year, National Semi's fiscal Q3 sales decreased approximately 36% from the $453 million reported for fiscal Q3 2008 and earnings per diluted share declined from the 29 cents recorded in the year-ago quarter.

Gross margin of 57.5% in National Semi's fiscal Q3 was down from the 65.8% gross margin achieved in fiscal Q2 and down from the 64.3% reported in the Santa Clara, Calif-based company's fiscal Q3 2008.

National Semi reported that bookings for its closed Q3 decreased 25% as compared to its fiscal Q2. The analog company said the decline was primarily driven by lower order rates from the distribution channel and that the bookings decline was seen broadly across all major geographies. National Semi also noted that total company billings exceeded bookings in its fiscal Q3.

National said it expects sales in its fiscal Q4 to decrease sequentially by 5 to 10% as its distribution channel "continues to be negatively impacted by the weak economy."

In response to economic conditions and its related business levels, National Semi said it will eliminate approximately 850 positions worldwide in product lines, sales and marketing, manufacturing, and support functions in the current quarter. The company has begun notifying affected employees.

As part of the cost-cutting plan, the company will close its assembly and test plant in Suzhou, China, and its wafer fabrication plant in Arlington, Texas. According to the company's Web site, the Suzhou location provides SOIC, TO, and other package products, while the Arlington location (pictured) is home to the manufacturing operations for many of National Semi’s analog products. Arlington's wafer fabrication area can produce in excess of 160,000 six-inch silicon wafers and 80,000 eight-inch silicon wafers per year and has a portfolio of 2000 products, according to the site.

Withholding a more specific timeline, National Semi said that the closures will occur in phases over several quarters, eventually resulting in the elimination of an additional 875 positions.

National currently employs about 6,500 people worldwide. With the actions, the company will eliminate 26% of its workforce.

"The worldwide recession has impacted National's business as demand has fallen considerably," said Brian L Halla, chairman and CEO, in a statement this morning. "However, the actions we announced today will help us remain competitive as we continue to focus on growing markets that can benefit from our new energy-efficiency initiatives."

The company said that the volume currently being supported by the Suzhou and Arlington facilities will be transferred primarily to other National locations. After the consolidation, National will have three manufacturing facilities: wafer fabrication plants in South Portland, Maine, and Greenock, Scotland, and an assembly and test facility in Melaka, Malaysia.

The company estimated it will ultimately incur between $160 million and $180 million in charges, consisting of severances, asset impairments, and other exit-related costs. Of that, $130 million to $145 million would likely be recorded in the current quarter.

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