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National Semiconductor Posts 22 Percent Year-to-Year Revenue Growth, 60.7% Gross Margin and Earnings of 37 Cents Per Share for Third Quarter of Fiscal Year 2006

Q3 FY06 revenues were $547.7 million, slightly higher than Q2 FY06

Gross margin reached 60.7%, up from 57.2% in Q2 and 52.7% in Q3 FY05

GAAP net income rose to $130.1 million, up from $114.7 million in Q2 and $77.4 million in Q3 FY05

Outlook for Q4 FY06 revenue is 2% to 4% up sequentially from Q3

Mar 9, 2006

March 9, 2006  --  National Semiconductor Corporation (NYSE:NSM) today reported GAAP net income of $130.1 million, or 37 cents per share, on revenues of $547.7 million for the third quarter of fiscal 2006, which ended February 26, 2006. 

National’s third quarter revenues were 22 percent higher than the $449.2 million revenues recorded in the third quarter of fiscal 2005, and $3.7 million higher than the $544.0 million revenues reported in Q2 FY06.  During the third quarter, revenues from broader markets served through National’s distribution channel were strong, which more than offset an expected seasonal decline in revenues from products that serve wireless handsets.

National’s Q3 GAAP net income was 13 percent higher sequentially and 68 percent higher year-to-year.  The Company previously reported net income of $114.7 million, or 32 cents per share, for the prior quarter and $77.4 million, or 21 cents per share, for the third quarter of fiscal 2005.  The Company's profitability improvement in Q3 was driven primarily by a significant increase in quarterly gross margin, which exceeded the 60 percent milestone for the first time in National’s history. 

The Company’s gross margin of 60.7 percent in Q3 FY06 compares with gross margin of 57.2 percent last quarter and 52.7 percent in the third quarter of last year. The continued improvement in National's gross margin is a direct result of the Company's focus on growing its higher-value Analog product portfolio. In the third quarter, gross margin was also aided by improvements in manufacturing volume and efficiencies.
 
“Business conditions were stronger than we had originally anticipated,” said Brian L. Halla, chairman and CEO of National Semiconductor.  “We reached our interim goal of 60 percent gross margin earlier than we expected and at the same time continued to gain market share in the analog standard linear market.”

Bookings Increased in Q3
National's third quarter bookings increased 2 percent sequentially from the second quarter. Bookings for analog standard linear products grew 8 percent in Q3.  New orders for amplifiers, interface and power management products grew at a much higher rate than the overall company average.  Bookings for products that serve wireless handsets also increased in Q3.  Regionally, bookings increased in Asia Pacific and Europe.  Year-to-year, total company bookings increased by more than 40 percent over last year’s third quarter.  Total company bookings exceeded billings in Q3 FY06.

Outlook for Q4, Fiscal 2006
Based upon current business conditions, National anticipates that revenues will grow 2 to 4 percent during the fourth quarter of fiscal 2006. In this revenue range, gross margin percentage would also be expected to improve slightly in Q4.

Company Declares Dividend
The Company today declared a cash dividend of $0.03 per outstanding share of common stock.  This dividend will be paid April 10, 2006 to shareholders of record at the close of business on March 20, 2006.

Stock Buy-Back Program Update
During the third quarter, National bought back $200 million of common stock under a previously approved stock repurchase program.  The diluted weighted average shares outstanding for Q3 fiscal 2006 was 354.6 million shares.

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.  These factors include, but are not restricted to, 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 10-K for the year ended May 29, 2005 (see Outlook and Risk Factors sections of Management's Discussion and Analysis of Financial Conditions and Results of Operations) and the 10-Q for the quarter ended November 27, 2005.

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, communication interface products and data conversion solutions. National's key analog markets include wireless handsets, displays and a variety of broad electronics markets, including medical, automotive, industrial, and test and measurement applications. Headquartered in Santa Clara, California, National reported sales of $1.91 billion for fiscal 2005, which ended May 29, 2005.  Additional company and product information is available at www.national.com.