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National Semiconductor Reports Results for Second Quarter Fiscal 2008

Q2 sales grew to $499.0 million, up 5.8% from Q1 of fiscal 2008 and down from $501.6 million in Q2 last year

Record gross margin percentage of 64.4%, up from 63.0% in Q1 and 58.9% in Q2 last year

EPS of 33 cents, up from 30 cents in Q1 and 27 cents in Q2 last year

Sales outlook for Q3 of fiscal 2008 expected to be seasonally down 1% to 5%

Dec 6, 2007

December 6, 2007 -- National Semiconductor Corporation (NYSE:NSM) today reported sales of $499.0 million and net income of $90.6 million, or 33 cents per share, for the second quarter of fiscal 2008 which ended November 25, 2007. 

National’s second quarter fiscal 2008 sales increased 5.8 percent sequentially from the first quarter of fiscal 2008, when the company reported $471.5 million in sales and earnings of 30 cents per share.  Increased demand for National’s new analog products, primarily in the wireless handset and personal mobile device markets, drove sales growth in the second quarter.

Gross margin in National’s second quarter of fiscal 2008 increased to 64.4 percent from 63.0 percent in the first quarter.  The sequential growth in gross margin percentage was driven by continued improvements in the company’s portfolio of higher-value analog products along with manufacturing performance that benefited from a higher volume of shipments.

Compared to last year’s second quarter, sales were down slightly from the $501.6 million reported in the second quarter of fiscal 2007; however, earnings per share were well above the 27 cents recorded last year.  Gross margin in the second quarter of fiscal 2008 was also higher than the 58.9 percent reported in the second quarter of fiscal 2007.
 
“The end market for wireless handsets and personal electronics is enjoying strong growth.  We were able to take advantage of that with our new analog products, and this is what drove our increased sales and record gross margins,” said Brian L. Halla, National’s chairman and CEO.  “Creating energy-efficient analog solutions is a key differentiator for National.  Going forward, we see our PowerWise® products increasingly driving our business in many applications and markets as energy efficiency becomes more critical.”

Bookings for Q2, Fiscal 2008
National’s bookings in the second quarter of fiscal 2008 decreased very slightly from the first quarter of fiscal 2008.  The company saw lower orders from its OEM customer base as it enters the seasonally slower third quarter.  This was partially offset by bookings from distributors which increased sequentially in the second quarter.  Regionally, second quarter bookings increased in the Americas and declined in all other regions. 

Notable Items in Q2, Fiscal 2008 Results
Included in second quarter fiscal 2008 results were $27.6 million in pre-tax stock compensation expenses under FASB Statement 123(R) and a $3.3 million charge for resolution of a litigation matter.  One year ago, the second quarter of fiscal 2007 included $33.2 million of pre-tax stock compensation expenses. 

Outlook for Q3, Fiscal 2008
National anticipates that sales in the third quarter of fiscal 2008 will decrease 1 percent to 5 percent from the second quarter of fiscal 2008 due primarily to the seasonally slower holiday period.  Consistent with lower sales, gross margin is expected to decline, and operating expenses are expected to be relatively comparable to second quarter levels.

Stock Repurchase Program
During the second quarter of fiscal 2008, the company repurchased approximately $280 million of stock under its stock buyback program.  As of the end of the second quarter of fiscal 2008, National had approximately $600 million of authorization still available under approved programs for future stock repurchases.  National Semiconductor’s diluted weighted average share count for the second quarter of fiscal of 2008 was 271.5 million shares, down from 283.9 million shares in the first quarter of fiscal 2008.

Company Declared Dividend
At its annual shareholders’ meeting on September 28, 2007, the company announced that the Board of Directors had declared a cash dividend of $0.06 per outstanding share of common stock, an increase from the prior quarterly cash dividend of $0.04 per share.  This dividend will be paid on January 7, 2008 to shareholders of record at the close of business on December 17, 2007.

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, including second quarter fiscal 2008 sales, gross margin, and operating expenses, 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 27, 2007 under the captions “Outlook”, “Risk Factors” and “Management's Discussion and Analysis of Financial Conditions and Results of Operations” contained therein and the 10-Q for the quarter ended August 26, 2007.

About National Semiconductor
National Semiconductor, the industry's premier analog company, creates high-value analog devices and subsystems.  National's leading-edge products include power management circuits, display drivers, audio and operational amplifiers, interface products and data conversion solutions. National's key analog markets include wireless handsets, displays, communications infrastructure, medical, automotive, industrial, and test and measurement applications. Headquartered in Santa Clara, Calif., National reported sales of $1.93 billion for fiscal 2007, which ended May 27, 2007.  Additional company and product information is available at www.national.com.

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