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National Semiconductor Reports 4% Sequential Revenue Increase, 54.7% Gross Margin and $132.1 Million Profit for 4th Quarter Fiscal 2005

Q4 revenues were $467 million, compared to $449 million in Q3 and $571 million a year ago

Gross margin rose 2 percentage-points sequentially in fourth quarter

Q4 GAAP earnings are 36 cents per share vs. 21 cents in Q3 and 24 cents a year ago

Commitment to analog market drives gains in gross margin

Company announced sale of PC Super I/O and cordless business units in Q4

Revenue outlook for Q1 of fiscal 2006 is flat to down 2 percent from Q4

Jun 9, 2005

June 9, 2005 - National Semiconductor Corporation (NYSE:NSM) today reported a GAAP net income of $132.1 million, or 36 cents per share, on revenues of $467 million for the fourth quarter of fiscal 2005, which ended May 29, 2005. 

On a sequential basis, National's Q4 revenues rose 4 percent from the third quarter, when the company reported $449 million in revenues and earnings of 21 cents per share.  Year-to-year, National's fourth quarter sales declined 18 percent from the fourth quarter of fiscal 2004, when the Company reported sales of $571.2 million, net income of $94.2 million and earnings of 24 cents per share.

Fourth quarter gross margin rose 2 percentage points to 54.7 percent driven by increased sales of analog products.  This compares to 52.7 percent gross margin reported in Q3 and 50.6 percent gross margin reported in Q2.  In the year-ago quarter, National posted 54.4 percent gross margin on revenues that were more than $100 million higher than the just-completed fourth quarter.

"Our focus on higher-value analog products and improved gross margin is relentless," said Brian L. Halla, National's chairman and CEO.  "Regardless of the market environment, we've significantly strengthened the company's core analog business and generated 20-plus percent return on invested capital for the second year in a row."

National's fourth quarter 2005 net results included several notable financial items, including an $86.1 million write-off of goodwill in connection with our annual goodwill assessment; a $51.1 million gain from the sale of National's PC Super /IO business; and a $2.6 million charge for cost reduction actions; all of these on a pre-tax basis.  In addition, the company's income tax provision was a net tax benefit of $55.9 million, primarily related to deferred tax assets.  A year ago, National's fourth quarter net income included a $30 million pre-tax special charge for a litigation issue.

Bookings Increased Sequentially in Q4
National's Q4 worldwide bookings increased 12 percent sequentially from Q3.  Year-to-year, bookings declined 29 percent from Q4 of fiscal 2004.

Regionally, bookings increased sequentially in North America, Asia Pacific and Japan.  Weekly booking rates increased month-to-month throughout the quarter.  Bookings from major distributors also improved.

Bookings for National's standard linear analog products rose 19 percent from Q3.  New order rates for power management, interface and data converter products were substantially higher than the company average.  Total company billings exceeded bookings in Q4.

Outlook for Q1, Fiscal 2006
During the fourth quarter, National Semiconductor announced the sale of its PC Super I/O and cordless business units.  These business dispositions will impact revenues in the first quarter of fiscal 2006.  Overall, the Company anticipates first quarter revenues will be flat to down 2 percent from fourth quarter levels.  The gross margin for Q1 is anticipated to be similar to Q4.

National to Pay Dividend July 11, 2005
In addition to announcing earnings for Q4, National today also declared a cash dividend of 2 cents per outstanding share of common stock.  The dividend is payable July 11, 2005 to stockholders of record at the close of business on June 20, 2005.

Summary of Fiscal 2005
For fiscal 2005, National reported a GAAP net income of $417.2 million, compared to the $282.8 million profit for fiscal 2004.  Earnings per share were $1.12 for fiscal 2005 compared to 73 cents for fiscal 2004.  Fiscal 2005 revenues were $1.91 billion compared to $1.98 billion for fiscal 2004.  The Company's profitability was driven by its continued improvement in gross margin, which was 53.4 percent for fiscal 2005 vs. 51 percent in fiscal 2004.

"We ended the year with over a billion dollars in cash reserves, a 21 percent return on invested capital and a stronger analog portfolio," Halla said.  "Our goal in fiscal 2006 is to drive gross margins even higher."

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 30, 2004 (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 February 27, 2005.

Summary of Results
For the 3 months ended
For the 12 months ended

May 29, 2005

May 30, 2004

May 29, 2005

May 30, 2004

Net sales

$467.0 million $571.2 million $1,913.1 million $1,983.1 million
Net income $132.1 million $  94.2 million $   417.2 million $   282.8 million
Earnings per diluted share $    0.36 $    0.24 $       1.12 $       0.73

About National Semiconductor
National Semiconductor, the industry's premier analog company, creates high performance 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.  

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