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National Semiconductor Reports $77.4 Million Profit, 52.7% Gross Margin for Third Quarter Fiscal 2005

Q3 revenues were $449 million, same as Q2 but down 13% from 14-week Q3FY04

Q3 GAAP earnings are 21 cents per share compared to 24 cents a year ago

Revenue outlook for Q4 of fiscal 2005 is 2 to 4 percent growth from Q3

Seeking buyer for Assembly and Test plant in Singapore

Mar 10, 2005

March 10, 2005 - National Semiconductor Corporation (NYSE:NSM) today reported a GAAP profit of $77.4 million, or 21 cents per share, on revenues of $449.2 million for the third quarter of fiscal 2005, which ended February 27, 2005. 

On a sequential basis, National's Q3 revenues were flat compared to Q2 fiscal 2005, when the Company recorded revenues of $448.9 million and earnings of 24 cents per share.  Year-to-year, National's third quarter sales declined 13 percent from the 14-week third quarter of fiscal 2004, when the Company reported sales of $513.6 million and earnings of 24 cents per share. The just-concluded third quarter of fiscal 2005 had the normal 13 calendar weeks, not 14. 

Third quarter gross margin was 52.7 percent compared to the 50.6 percent gross margin recorded in Q2.   National achieved a 2 percentage-point improvement in gross margin despite flat sales, factory utilization rates in the low-60s percentage and a $15 million reduction in inventory.  Year over year, National's gross margin for Q3 was 1.3-percentage-points higher than last year's third quarter on 13 percent lower sales.

"Our gross margin focus is paying off," said Brian L. Halla, National's chairman, president and CEO.  "We continue to drive our product mix more and more toward higher-value analog products regardless of the current cautious sales environment."

National's third quarter 2005 net results included a $20 million pre-tax charge for severances related to a workforce reduction announced in January.  This was largely offset by a pre-tax $7 million credit from a California Manufacturer's Investment Credit refund and a lower income tax rate of 8.7 percent.   Second quarter fiscal 2005 net results included $19 million in pre-tax gains from the sale of assets and the resolution of litigation, as well as a $4 million income tax benefit from the resolution of a tax matter.

Bookings Increased in Q3
National's Q3 worldwide bookings increased 6 percent sequentially in Q3.  Year-to-year, bookings declined 35 percent from the 14-week Q3 of fiscal 2004.  Total Company billings exceeded bookings in Q3.

Bookings increased in North America and Europe for analog products from National's distributors.  Average weekly booking rates increased each month through the quarter.  The Company also saw a recovery in turns orders in Q3.

Orders for National's key analog products --- power management, amplifiers, interface and data conversion --- grew at a higher rate than the Company's overall average. 

Outlook for Q4, FY2005
National Semiconductor anticipates Q4 revenues to increase 2 to 4 percent sequentially from Q3.  Gross margin is anticipated to increase to just over 53 percent in Q4.

Additional Corporate Actions for Q4
National to Pay Dividend April 11

In addition to announcing earnings for Q3, National also declared a cash dividend of 2 cents per outstanding share of common stock.  The dividend is payable April 11, 2005 to stockholders of record at the close of business on March 21, 2005.  This is National's second consecutive quarter of paying dividends.

Board Authorizes Additional Repurchase of $400 Million of National Stock
The Company's Board of Directors has authorized additional spending of up to $400 million for a new stock repurchase program.  This follows two previous stock buy-back programs, totaling $800 million, which commenced in 2003, the second of which was completed in the third quarter.  National had 349,079,071 shares of common stock outstanding as of February 27, 2005.

Company Seeking Buyer for Assembly and Test Plant in Singapore

National also announced today that it is seeking a buyer for its Assembly and Test facility in Singapore.  The 1,000-person facility specializes in high pin-count packages.

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 of recently introduced 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 November 28, 2004.

Summary of Results
For 3 months ended
        Feb. 27, 2005
        Feb. 29, 2004
Net sales              $449.2              $513.6
Net income              $  77.4              $  93.1
Earnings per share, diluted              $    0.21               $    0.24***

*** (Historical earnings per share amounts have been adjusted for the Company's 2-for-1 stock split that occurred in May 2004.)

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 markets include wireless handsets, displays, PCs and laptops.  The company's analog products are also optimized for numerous applications in a variety of electronics markets, including medical, automotive, industrial, and test and measurement.  Headquartered in Santa Clara, California, National reported sales of $1.98 billion for fiscal 2004, which ended May 30, 2004.  Additional company and product information is available at www.national.com

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