National Semiconductor Corp, which makes chips for cellular phones and personal computers, said it will eliminate 1,100 jobs, or 10 percent of its workforce, to reduce costs as orders slump.
The company will break even or have a loss of as much as US$0.04 a share in the fourth quarter ending May 27, and sales will miss analysts' forecasts, spokesman Bill Callahan said. National Semiconductor will take a charge of US$10 million to US$12 million for the reductions, which will save US$70 million to US$80 million a year.
National Semiconductor and other companies that supply chips to cell-phone and PC makers have been forced to shrink their work forces and reduce growth forecasts because a slowdown in demand for the devices created inventory buildups at customers.
Manufacturers aren't ordering as many new chips until they work through their existing stockpiles, the company said.
The shares of Santa Clara, California-based National fell as much as 7 percent to US$23.22 after the company reduced its forecast. The stock has lost more than half its value in the past year.
On average, analysts polled by First Call/Thomson Financial expected fourth-quarter profit of US$0.04 a share, excluding certain costs and charges. Sales in the current period will be US$390 million to US$400 million, the company said, compared with forecasts for US$431 million, the average estimate of three analysts surveyed by IBES International Inc.
The PC market didn't recover as fast as the company expected, and handset manufactures still have large inventories of chips, Chief Operating Officer Donald Macleod said on a conference call today.
"The assumption was that February was the low point," said Chairman and Chief Executive Brian Halla. That proved too optimistic, he said.
In March, the company said it would miss analysts' fourth-quarter estimates, which at the time called for US$496.3 million in sales and earnings of US$0.23 a share.
Halla repositioned National Semiconductor to take advantage of the booming market for cell phones and for the base stations that send signals to the phones. The company sold its Cyrix unit, which made cheap microprocessors for PCs, ceding that market to Intel Corp and Advanced Micro Devices Inc. National Semiconductor focused instead on developing its Geode system-on-a-chip semiconductors for the hand-held computer market.
A decline in demand for cell phones with more features and for base stations has delayed Halla's plans, analysts said.
The company will eliminate 800 full-time employees and 128 contractors through firings, attrition and retirements, National said. Employees will receive severance packages and placement services.
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