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NATIONAL SEMICONDUCTOR REPORTS EARNINGS OF 56 CENTS PER SHARE ON REVENUES OF $595 MILLION FOR SECOND QUARTER OF FISCAL 2001

Dec 7, 2000

Dec. 7, 2000 - National Semiconductor Corporation (NYSE:NSM) today reported net earnings of $106.7 million, or 56 cents per share, on revenues of $595.0 million for the second quarter of fiscal 2001, which ended November 26, 2000. In the comparable quarter last year, which ended November 28, 1999, the company reported net earnings of  $70.4 million, or 37 cents per share, on sales of $513.9 million.

"National had a respectable quarter with increases of 16 percent in revenues and 52 percent in earnings over last year, despite the impact of inventory corrections by some of our customers in the mobile phone market and slower demand in the PC market," said Brian L. Halla, president and chief executive officer. 


Summary of results 
3 months ended:                  Nov. 26, 2000           Nov. 28, 1999
Net sales                           $ 595.0                 $ 513.9
Net income                          $ 106.7                 $  92.0
Net earnings                        $ 106.7                 $  70.4*
Earnings per share diluted          $   0.56                $   0.37
   (excluding one-time items)
All figures in millions of dollars, except per share amounts
*National's net earnings for the second quarter of last year is net 
income excluding net one-time after tax gains of $21.6 million. 
Including these one-time gains, the company had net income of $92.0 
million or 49 cents per share for the second quarter of fiscal year 2000.

During the just-completed second quarter of fiscal year 2001, National reported a 19 percent decrease in bookings worldwide from the second quarter of last year.  Bookings for analog products declined at a slower rate than the company as a whole, while new orders for application specific wireless products grew from last year.

New orders from the distribution channel fell significantly as distributors adjusted their inventories for slowing year-over-year growth in resales. Orders for traditional personal computer products, including motherboards and PC peripherals, also were down in the quarter, reflecting slower than expected fourth calendar quarter sales in the PC market.

Looking forward to the February quarter, National now expects to see the impact of continued inventory adjustments in the distribution channel, a gradual stabilization of sales in the mobile phone market, and seasonal weakness in the PC and peripherals market.  These factors could result in a third quarter sales decline of up to 10 percent from the November quarter just ended. Gross margins may drop to 47 to 48 percent from the company's current 50 percent level, with a resulting decline in earnings per share.

National said market conditions should improve after the end of the calendar year as our wireless handset customers and distributor partners realize their year-end inventory goals.

"As a result," Halla said,  "we are now expecting overall sales for the current fiscal year, which ends May 27, 2001, to improve in the range of 10 percent over last year." The company is also targeting gross margins of 50 percent for the full fiscal year.

National also continues to leverage its analog expertise to drive development of the wireless, information appliance and flat panel display markets. Two dozen leading companies including Compaq, 3Com, IBM and Honeywell, displayed state-of-the-art Personal Access Devices at the recent Comdex computer convention, all based on National's WebPAD? design and using the National? Geode? family of integrated processor solutions
 
This outlook contains forward looking statements dependent on a number of risks and uncertainties, including such factors as, but not restricted to, new orders received and shipped during the remainder of the third quarter, the degree of factory utilization, the successful sale of existing inventories, and the ramp up of recently introduced products. Other risk factors are included in the company's 10Q from the first quarter ended August 27, 2000 and the 10-K for the year ended May 28, 2000 (see Outlook section of Management's Discussion and Analysis of Result of Operations and Financial Conditions) and the Annual Report dated May 28, 2000.

# # #

NATIONAL SEMICONDUCTOR CORPORATION                     
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)

                                Three Months Ended     Six Months Ended
                                ------------------    -------------------
                                Nov. 26,   Nov 28,    Nov. 26,   Nov. 28,
                                 2000      1999          2000       1999
                                 -------   -------    --------   --------
Net sales                        $ 595.0   $ 513.9    $1,235.8    $ 995.7
Operating costs and expenses:
  Cost of sales                    294.3     281.5       595.7      578.2
  Research and development         112.1      85.0       215.8      200.1
  Selling, general and 
   administrative                   78.8      75.1       179.4      151.1
  Special items:
   In process R&D charge              -         -          4.1         -
   Restructuring of operations        -       (3.1)        2.3       (3.1)
   Gain on disposition of Cyrix
     PC microprocessor business        -     (26.8)         -       (26.8)
                                 -------   -------    --------   --------
   Total operating costs
     and expenses                  485.2     411.7       997.3      899.5
                                 -------    ------    --------   --------
Operating income                   109.8     102.2       238.5       96.2
Interest income, net                15.2       1.6        29.3        0.2
Other income, net                    8.4       0.2        45.9       57.2
                                 -------   -------    --------   --------
Income before income taxes
  and extraordinary item           133.4     104.0       313.7      153.6   
Income tax provision                26.7       5.2        62.8        7.7
                                 -------    ------    --------   --------
Net income before 
  extraordinary item               106.7      98.8       250.9      145.9
Extraordinary loss on early
  extinguishment of debt, net
  taxes of $0.4 million               -        6.8          -         6.8
                                 -------     ------   --------   --------
Net income                       $ 106.7    $ 92.0    $  250.9   $  139.1
                                 =======     ======   ========   ========
Earnings per share before
  extraordinary item:
    Basic                         $  0.60    $  0.57    $   1.41    $  0.85   
    Diluted                       $  0.56    $  0.52    $   1.29    $  0.78
Earnings per share: 
         Basic                    $  0.60    $  0.53    $   1.41    $  0.81
         Diluted                  $  0.56    $  0.49    $   1.29    $  0.74

Selected income statement ratios as a percentage of sales:
Gross margin                      50.5%       45.2%      51.8%     41.9%
Research and development(excluding 
  any in process R&D charge)      18.8%       16.5%      17.5%     20.1%
Selling, general and              
   administrative                 13.2%       14.6%      14.5%     15.2%
Net income                        17.9%       17.9%      20.3%     14.0%
Effective tax rate                20.0%        5.0%      20.0%      5.0% 

NATIONAL SEMICONDUCTOR CORPORATION 
CONDENSED CONSOLIDATED BALANCE SHEETS  (Unaudited) 
(in millions)
                                               Nov 26,        May 28,
                                                2000           2000   
ASSETS                                        --------       --------
Current assets:
  Cash and cash equivalents                   $  846.0       $  778.8
  Short-term marketable investments               30.3           22.3
  Receivables, net                               213.4          258.6
  Inventories                                    201.8          192.9
  Deferred tax assets                            125.7          125.7
  Other current assets                            41.6           40.5
                                              --------       --------
  Total current assets                         1,458.8        1,418.8
Net property, plant and equipment                821.5          803.7
Long-term cash investments                        61.9           48.8
Other assets                                     140.3          110.9
                                              --------       --------
Total assets                                  $2,482.5       $2,382.2
                                              ========       ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings and current 
    portion of long-term debt                 $   32.0       $   31.4
  Accounts payable                               143.3          194.5
  Accrued expenses                               277.3          315.1
  Income taxes                                    92.8           86.7
                                              --------       --------
  Total current liabilities                      545.4          627.7
Long-term debt                                    39.5           48.6
Other non-current liabilities                     66.6           62.6
                                              --------       --------
  Total liabilities                              651.5          738.9
                                              --------       --------
Put warrants                                       5.2            -
                                              --------       -------- 
Commitments and contingencies                                        
Shareholders' equity:
  Common stock                                    87.1           88.8
  Additional paid-in capital                   1,307.0        1,395.3
  Retained earnings                              437.6          186.7
  Accumulated other comprehensive loss            (5.9)         (27.5)
                                              --------       --------
  Total shareholders' equity                   1,825.8        1,643.3
                                              --------       --------
Total liabilities and shareholders' equity    $2,482.5       $2,382.2
                                              ========       ========

NATIONAL SEMICONDUCTOR CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)                                       Six Months Ended
                                                  --------------------
                                                  Nov. 26,     Nov. 28,
                                                   2000         1999 
                                                  -------      -------
Cash flows from operating activities:
Net income                                        $ 250.9      $ 139.1
Adjustments to reconcile net income
  with net cash provided by operations:
  Depreciation and amortization                     118.0        137.7
  Gain on investments                               (38.8)       (48.4) 
  Loss on disposal of equipment                       1.3          5.0
  Donation of equity securities                      20.5           -
  Non-cash special items                              6.4        (29.9)
  Other, net                                          0.3          2.9
  Changes in certain assets and liabilities, net:
    Receivables                                      45.2        (42.0) 
    Inventories                                      (8.9)       (21.7)
    Other current assets                             (2.7)        (4.6) 
    Accounts payable and accrued expenses           (87.4)       (60.5)
    Current and deferred income taxes                 6.1         18.3
    Other liabilities                                 4.0          3.8
                                                  --------     --------
Net cash provided by operating activities           314.9         99.7
                                                  --------     --------
Cash flows from investing activities:
Purchase of property, plant and equipment          (121.2)       (58.7)
Sale of equipment                                      -           8.1  
Sale and maturity of marketable investments           7.0        137.0
Purchase of marketable investments                  (28.0)       (89.0)
Sale of investments                                  29.9         52.2
Business acquisitions, net of cash acquired         (24.9)          -
Disposition of Cyrix PC microprocessor business        -          70.0
Purchase of investments and other, net              (11.2)         2.2
                                                  --------     --------
Net cash provided by (used by) 
  investing activities                             (148.4)       121.8
                                                  --------     --------
Cash flows from financing activities:
Redemption of convertible subordinated notes           -        (265.8)  
Repayment of debt                                    (8.5)       (22.1)
Issuance of common stock, net                        35.0         50.5
Purchase and retirement of treasury stock          (125.8)          -
                                                  --------     --------
Net cash used by financing activities               (99.3)      (237.4)
                                                  --------     --------
Net change in cash and cash equivalents              67.2        (15.9)
Cash and cash equivalents at beginning of period    778.8        418.7
                                                  --------     --------
Cash and cash equivalents at end of period        $ 846.0      $ 402.8
                                                  ========     ========

PART I.  FINANCIAL INFORMATION
EARNINGS PER SHARE (Unaudited)
(in millions, except per share amounts)

                            Three Months Ended        Six Months Ended
                            ------------------      --------------------
                            Nov. 26,   Nov. 28,      Nov. 26,   Nov. 28,
                              2000       1999         2000        1999  
                            --------   -------      --------    --------
Earnings per share: 
         Basic                $ 0.60    $ 0.53        $ 1.41      $ 0.81
         Diluted              $ 0.56    $ 0.49        $ 1.29      $ 0.74
Weighted-average shares: 
         Basic                 178.1     172.2         178.1       171.3
         Diluted               191.9     189.5         193.9       187.5
   
Income used in basic and 
   diluted earnings per 
   common share calculation   $106.7    $ 92.0       $ 250.9     $ 139.1

Weighted-average shares used in basic and diluted earnings per share for 
the three and six months ended November 26, 2000 includes the effect of 
the company?s repurchase of approximately 5.5 million shares of common 
stock late in the period. In addition, weighted-average shares used in 
diluted earnings per share for the same periods reflect less dilution 
from outstanding options due to lower average market price.

NOTES TO FINANCIAL SCHEDULES
                                  Three Months Ended    Six Months Ended
                                  ------------------   ------------------
                                  Nov. 26,  Nov. 28,   Nov. 26,  Nov. 28,
                                    2000      1999       2000      1999   
                                  --------  --------   --------  --------
Interest income, net
--------------------
Interest income                    $  16.4   $   7.6    $  31.8   $  13.5
Interest expense                      (1.2)     (6.0)      (2.5)    (13.3)
                                   --------  --------   --------  --------
  Interest income, net             $  15.2   $   1.6   $   29.3  $    0.2
                                   ========  ========   ========  ========
Other income, net
-----------------
Net intellectual property income   $   3.1   $   0.1    $   4.5   $   6.9
Gain on investments, net               2.7       0.1       38.8      48.5
Other                                  2.6        -         2.6       1.8
                                  --------  --------   --------  --------
  Total other income, net          $   8.4   $   0.2   $   45.9   $  57.2
                                  ========  ========   ========  ========