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NATIONAL SEMICONDUCTOR REPORTS LOSS OF 29 CENTS PER SHARE BEFORE EFFECT OF PREVIOUSLY ANNOUNCED ONE-TIME CHARGES

Dec 10, 1998

Dec. 10, 1998National Semiconductor Corporation? today announced a net loss of 29 cents per share for the second quarter of fiscal 1999, ended Nov. 29, 1998, before the effect of previously announced one-time charges related to manufacturing restructuring and the termination of a foundry agreement with IBM Corporation. The net loss for the quarter, also excluding one-time charges, was $48.6 million on revenues of $510.1 million. This compares with net income of $28.9 million, or 17 cents per share (diluted), on sales of $719.9 million, in the second quarter of fiscal 1998. Including the one-time charges, National reported a net loss of $94.4 million, or 57 cents per share for the quarter.



Summary of Results:




Summary of  Results:
3 months ended:            Nov. 29, 1998                           Nov. 23, 1997
	          Without    IBM    Restructuring  As Reported	   As Reported
                  One-Time  Charge*   Charge       With One-Time
                  Charges              Net*           Charges
Net sales	  $ 510.1			     $  510.1        $  719.9
Income (loss) before
  income taxes	  $ (64.8) $ (48.6)  $  (12.5)       $ (125.9)           40.5
Income tax
 (benefit)expense $ (16.2)   (12.2)      (3.1)	        (31.5)           11.6

Net income (loss) $ (48.6) $ (36.4   $   (9.4)       $  (94.4)       $   28.9
Net income (loss) $  (0.29)                          $   (0.57)           0.17
  per share (diluted)
(All figures in millions of dollars, except per share amounts)
* See Notes to Financial Tables

"The execution of our manufacturing and Cyrix groups, working together, exceeded our expectations and brought us along much quicker on our road to profit recovery," said Brian L. Halla, chairman, president and chief executive officer of National Semiconductor.



During the quarter National transitioned Cyrix manufacturing from IBM to National's manufacturing facility in Maine utilizing its state-of-the-art 0.25-micron process. In addition, National said the elimination of marketing competition from its third party foundry, combined with growing market acceptance of Cyrix processors in both the standard interface and integrated processor families, has increased its market opportunity. In the standard interface category the Cyrix M II processor gained acceptance during the quarter from Compaq, IBM and Packard-Bell/NEC. In the most recent fiscal quarter the Cyrix market share of the fast-growing sub-$1,000 market has grown from 7.7 percent to 12.9 percent, according to Mercury Research, Inc. In the same period, Cyrix captured one-third of the retail sales for desktop processors in the fast-growing sub-$800 market segment, according to data from Audits and Surveys.



The Cyrix MediaGX? processor is successfully delivering on National's strategy of becoming the dominant supplier of integrated processor-based solutions to the Windows-compatible information appliance market. Information appliance design wins include handheld PCs at Casio, Palmax and NEC; Windows-based terminals at Wyse Technology, Boundless and Takaoka; a set-top box at Boca Research; and point-of-sale systems at Siemens and Via (the "wearable" computer).



Quarterly orders showed seasonal improvement, increasing by 12 percent sequentially over the first quarter of fiscal 1999. September bookings declined from strong August levels, improved in October and finished in November with the strongest bookings in 12 months. Overall bookings equaled billings for the quarter.



Analog bookings grew almost twice as fast as orders for the company as a whole, led by returning strength in power management and new interface product introductions. Networking orders continued to improve with stronger interconnect markets, while wireless products improved over the summer quarter. Orders for PC motherboard components and Cyrix processors also grew over the summer, but at a slower rate as customers peaked production of personal computer systems for the holiday season. Bookings for all major product groups, however, declined compared with last year. All worldwide regions reported flat or growing orders over the summer quarter, led by southeast Asia, but declined compared with last year.



"While we enjoyed the recent strength in new orders, we remain cautious concerning holiday impacts on our traditional businesses during the third quarter," Halla said. "Increasing design wins of our Cyrix processors may, however, provide an offset to this traditional seasonal weakness."



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 timely ramp up of new submicron production facilities, 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 10-Q for the quarter ended August 30, 1998 (see the Outlook section of Management's Discussion and Analysis of Results of Operations and Financial Conditions).



National Semiconductor provides system-on-a-chip solutions for the information age. Combining real-world analog and state-of the-art digital technology, the company's chips lead many sectors of the personal computer, communications, and consumer markets. With headquarters in Santa Clara, California, National has annual sales of approximately $2.5 billion and 11,500 employees worldwide. Additional company and product information is available on the World Wide Web at www.national.com.


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


                            Three Months Ended        Six Months Ended
                            ------------------      -------------------
                            Nov. 29,  Nov. 23,      Nov. 29,   Nov. 23,
                              1998      1997          1998       1997
                            --------  --------      --------   --------
Net sales                    $ 510.1   $ 719.9       $ 979.7   $1,376.6

Operating costs and expenses:
Cost of sales                  417.1     436.4         831.7      832.7
Research and development       112.9     118.0         235.0      230.0
Selling, general and
 administrative                 84.9      97.8         157.9      183.8
Special items:
 Merger costs                     -       30.0            -        30.0
 Restructuring of operations    12.5        -           12.5         -
 In-process R&D charge            -        2.5            -         2.5
                             -------    ------      --------    -------
   Total operating costs
     and expenses              627.4     684.7       1,237.1    1,279.0
                             -------    ------      --------    -------
Operating income(loss)        (117.3)     35.2        (257.4)      97.6
Interest income(expense), net   (0.3)      3.4          (0.2)      15.1
Other income(expense), net      (8.3)      1.9          (8.0)       9.3
                             -------   -------      --------    -------
Income(loss) before
  income taxes                (125.9)     40.5        (265.6)     122.0
Income tax provision(benefit)  (31.5)     11.6         (66.4)      30.5
                             -------    ------      --------    -------
Net income(loss)              $(94.4)   $ 28.9       $(199.2)   $  91.5
                             =======    ======      ========    =======

Earnings(loss) per share:
         Basic                $(0.57)    $ .18        $(1.20)    $  .56
         Diluted              $(0.57)    $ .17        $(1.20)    $  .54


Selected income statement ratios as a percentage of sales:

Gross Margin                   18.2%*    39.4%         15.1%*     39.5%
Research and Development       22.1%     16.7%         24.0%      16.9%
   including in-process R&D
   charge for fiscal 1998
Selling, general and           16.6%     13.6%         16.1%      13.4%
   administrative
Net income(loss)              (18.5%)     4.0%        (20.3%)      6.6%

Effective tax rate             25.0%     28.6%         25.0%      25.0%

*Includes the effect of charges related to the termination of the IBM
 agreement. Excluding the IBM charges, gross margin would have been 27.8%
 and 20.1% for the three months and nine months ended November 29, 1998,
 respectively.


NATIONAL SEMICONDUCTOR CORPORATION  CONDENSED CONSOLIDATED BALANCE SHEETS  (Unaudited) (in millions)
                                              Nov. 29,       May 31,
                                                1998          1998
ASSETS                                        --------       --------
Current assets:
  Cash and cash equivalents                   $  421.1       $  460.8
  Short-term marketable investments              103.9          112.4
  Receivables, net                               206.0          208.5
  Inventories                                    179.7          283.9
  Deferred tax assets                            181.2          166.2
  Other current assets                            48.3           76.4
                                              --------       --------
  Total current assets                         1,140.2        1,308.2

Property, plant and equipment                  2,978.6        2,939.7
  Less accumulated depreciation               (1,369.6)      (1,283.9)
                                              --------       --------
  Net property, plant and equipment            1,609.0        1,655.8
Other assets                                     187.0          136.7
                                              --------       --------
Total assets                                  $2,936.2       $3,100.7
                                              ========       ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Short term borrowings and current
    portion of long-term debt                 $   44.3       $   53.9
  Accounts payable                               198.3          237.0
  Accrued expenses                               325.4          310.9
  Income taxes                                   237.7          191.8
                                              --------       --------
  Total current liabilities                      805.7          793.6

Long-term debt                                   394.0          390.7
Deferred income taxes                              2.3            4.4
Other non-current liabilities                     53.4           53.1
                                              --------       --------
  Total liabilities                            1,255.4        1,241.8
                                              --------       --------
Commitments and contingencies

Shareholders' equity:
  Common stock                                    83.5           82.7
  Additional paid-in capital                   1,233.0        1,212.8
  Minimum pension liability                      (12.5)         (12.5)
  Retained earnings                              376.8          575.9
                                              --------       --------
  Total shareholders' equity                   1,680.8        1,858.9
                                              --------       --------
Total liabilities and shareholders' equity    $2,936.2       $3,100.7
                                              ========       ========

 NATIONAL SEMICONDUCTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions)                                    Six Months Ended
                                                  --------------------
                                                  Nov. 29,     Nov. 23,
                                                   1998         1997
                                                  -------      -------
Cash flows from operating activities:
Net income(loss)                                  $(199.2)     $  91.5
Adjustments to reconcile net income(loss)
  with net cash provided by operations:
  Depreciation and amortization                     187.4        136.4
  (Gain)loss on investments                           0.1         (6.7)
  Tax benefit associated with stock options           0.4         15.3
  Loss on disposal of equipment                      35.5          6.1
  Provision for loss on note receivable               1.6           -
  Non-cash special charges                           12.5         32.5
  Other, net                                         (3.0)        (3.7)
  Changes in certain assets and liabilities, net:
    Receivables                                       2.5        (71.8)
    Inventories                                     104.2        (22.8)
    Other current assets                             28.1        (13.4)
    Accounts payable and accrued expenses           (31.2)         0.4
    Current and deferred income taxes               (32.2)         7.6
    Other non-current liabilities                     0.3          7.3
                                                  --------     --------
Net cash provided by operating activities           107.0        178.7
                                                  --------     --------
Cash flows from investing activities:
Purchase of property, plant and equipment          (156.1)      (366.3)
Sale and maturity of marketable investments          73.3        909.2
Purchase of marketable investments                  (64.7)      (948.7)
Sale of investments                                   0.1         12.1
Business acquisition, net of cash acquired             -          (2.8)
Other, net                                           (5.9)        (0.5)
                                                  --------     --------
Net cash used by investing activities              (153.3)      (397.0)
                                                  --------     --------
Cash flows from financing activities:
Proceeds from bank borrowing                         10.0          0.4
Repayment of debt                                   (16.3)        (6.4)
Issuance of common stock, net                        12.9         43.3
                                                  --------     --------
Net cash provided by financing activities             6.6         37.3
                                                  --------     --------
Net change in cash and cash equivalents             (39.7)      (181.0)
Adjustment to conform pooling of interest for
  cash and cash equivalents at beginning of year       -          17.6
Cash and cash equivalents at beginning of period    460.8        897.8
                                                  --------     --------
Cash and cash equivalents at end of period        $ 421.1      $ 734.4
                                                  ========     ========

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


                            Three Months Ended        Six Months Ended
                            ------------------      --------------------
                            Nov. 29,   Nov. 23,      Nov. 29,   Nov. 23,
                              1998       1997         1998        1997
                            --------   -------      --------    --------

Earnings(loss) per share:
         Basic                $(0.57)    $ .18        $(1.20)     $  .56
         Diluted              $(0.57)    $ .17        $(1.20)     $  .54

Weighted average shares:
         Basic                 166.6     163.7         166.2       163.0
         Diluted               166.6     169.3         166.2       168.0

Income(loss) used in basic
   and diluted earnings(loss)
   per common share
   calculation			$(94.4)   $ 28.9       $(199.2)    $  91.5


Notes to Financial Tables



One-Time Charges

In September 1998, the Company announced that it had reached agreement with IBM Corporation for termination of an existing wafer manufacturing and marketing agreement between National's Cyrix subsidiary and IBM. Under terms of the agreement IBM agreed to cease sale of Cyrix-designed processors before the end of calendar 1998 and Cyrix was to be relieved of its wafer purchase obligation to IBM. In addition, Cyrix was to transfer certain assets to IBM. As a result of the termination and transfers, the Company incurred a one-time charge of $48.6 million recorded in cost of sales in its second quarter ending November 29, 1998. The one-time charge included $30.6 million for the write-off of assets transferred to IBM and $18 million for the write-off of prepaid wafer purchases and other costs associated with terminating the contract.



In October 1998, the Company announced plans to close its 4-inch wafer fabrication facility in Greenock, Scotland ("Fab 1") and consolidate Fab 1 manufacturing into the Company's 6-inch wafer fabrication facility also in Greenock. This action is expected to be completed within 12 to 18 months. In connection with the closure of Fab 1, the Company recorded a restructure charge of $21.3 million in its second quarter ending November 29, 1998. The charge included $11.9 million for severance, $3.9 million for costs associated with the dismantling of Fab 1 and approximately $5.5 million for other related exit costs. This restructure charge was offset by an $8.8 million release of excess reserves related to certain prior restructure actions. The release included $2.8 million of severance, $2.3 million of asset write-offs and $3.7 million of other exit costs.


(in millions)                     Three Months Ended    Six Months Ended
                                  ------------------   ------------------
                                  Nov. 29,  Nov. 23,   Nov. 29,  Nov. 23,
                                    1998      1997       1998      1997
                                  --------  --------   --------  --------
Interest income(expense), net
-----------------------------
Interest income			     $   6.5   $  12.5    $  13.5   $  26.5
Interest expense                   $  (6.8)  $  (9.1)   $ (13.7)  $( 11.6)
					    --------  --------   --------  --------
  Interest income(expense), net    $  (0.3)  $   3.4    $  (0.2)  $  14.9
					    ========  ========   ========  ========

Other income(expense), net
-----------------------------
Net intellectual property income   $   0.1   $   1.9    $   0.4   $   2.6
Gain(loss)on investments, net         (0.1)       -        (0.1)      6.7
Other                                 (8.3)       -        (8.3)       -
                                  --------  --------   --------  --------
 Total other income(expense), net  $  (8.3)  $   1.9    $  (8.0)  $   9.3
                                  ========  ========   ========  ========