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National Semiconductor Reports Results for Second Quarter Fiscal 2011

Q2 sales of $390.4 million decreased 5% from Q1 of fiscal 2011 but increased 13% from Q2 of fiscal 2010

GAAP earnings per share of 34 cents was down from 36 cents in Q1 but up from 20 cents one year ago

Gross margin of 68.9% decreased from 70.9% in Q1 but increased from the 65.3% posted in Q2 of last year

Sales outlook for Q3 of fiscal 2011 expected to be down 8 percent to 12 percent sequentially

Dec 9, 2010

December 9, 2010 -- National Semiconductor Corp. (NYSE:NSM) today reported sales of $390.4 million and net income of $83.5 million, or 34 cents per diluted share, for the second quarter of fiscal 2011, which ended Nov. 28, 2010.

National’s second quarter sales were 5 percent lower than the $412.0 million in sales reported in the first quarter of fiscal 2011 due to lower demand from OEMs and distributors in all regions. Sales in the second quarter of fiscal 2011 were 13 percent higher than the $344.6 million reported in the second quarter of fiscal 2010.

Second quarter net income of $83.5 million, or 34 cents per diluted share, was a decrease from the $88.8 million, or 36 cents per diluted share, in the first quarter of fiscal 2011. One year ago, National reported net income of $47.0 million, or 20 cents per diluted share.

Gross margin of 68.9 percent decreased from 70.9 percent in the first quarter of 2011, which had set a record for the company. National reported gross margin of 65.3 percent in the second quarter of fiscal 2010.

“Revenues in our second quarter were impacted by two factors. First, although distributor resales of our products were about flat sequentially, we shipped approximately $25 million less to them than in the preceding quarter. Secondly, we saw, in aggregate, slower demand from mobile phone customers than we typically see in this seasonally strong, pre-holiday season quarter,” said Don Macleod, National’s chief executive officer. “As this inventory correction by our customers and distributors works its way through our business this quarter, we will continue to invest in our revenue growth initiatives. This should position us to show amplified revenue growth as we emerge from what we see as a temporary supply chain adjustment.”

Bookings for Q2, Fiscal 2011
National’s total company bookings decreased 24 percent sequentially in the second quarter of fiscal 2011. Distributors reduced their order rates as lead times across the industry have generally declined, and product availability has improved. Bookings were also down from wireless handset customers as they adjusted their backlog coverage to reflect lower build activity following the holiday season. During the second quarter of fiscal 2011, billings exceeded bookings.

Notable Items in Q2, Fiscal 2011
Second quarter fiscal 2011 results included $6.5 million of pre-tax restructuring charges as the company incurred costs for process transfers and shutdown activities related to previously announced plant closures.

Outlook for Q3, Fiscal 2011
For the third quarter of fiscal 2011, National projects revenues to be between $344 million to $359 million, or a decrease of 8 percent to 12 percent sequentially. Guidance for the third quarter of fiscal 2011 is slightly below National’s five-year average sequential decline of 9 percent, driven primarily by adjustments in the supply chain.

Company Declares Dividend
The company announced today that the Board of Directors has declared a cash dividend of $0.10 per outstanding share of common stock. The dividend will be paid on Jan. 10, 2011 to shareholders of record at the close of business on Dec. 20, 2010.

Special Note
This release contains forward-looking statements dependent on a number of risks and uncertainties pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters set forth in this press release, including management’s expectations regarding future performance, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include, but are not restricted to, such factors as new orders received and shipped during the quarter, the degree of factory utilization, the sale of inventories at existing prices, and the ramp up and sale of new analog products. Other risk factors are included in the company's annual report on Form 10-K for the fiscal year ended May 30, 2010 under the captions “Outlook,” “Risk Factors” and “Management's Discussion and Analysis of Financial Conditions and Results of Operations” contained therein, and the quarterly report on Form 10-Q for the quarter ended Aug. 29, 2010.

About National Semiconductor
National Semiconductor is a leader in power management technology. Known for its easy-to-use analog integrated circuits and world-class supply chain, National’s high-performance analog products enable its customers’ systems to be more energy efficient. Headquartered in Santa Clara, Calif., National reported sales of $1.42 billion for fiscal 2010. Additional information is available at www.national.com.

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