National Semiconductor CEO Discusses F2Q2011 Results – Earnings Call Transcript

National Semiconductor CEO Discusses F2Q2011 Results â¿¿ Earnings Call Transcript
By Seeking Alpha ,

National Semiconductor Corporation (NSM)

F2Q2011 Earnings Call Transcript

December 9, 2010 4:30 pm ET

Executives

Mark Veeh – IR Manager

Donald Macleod – Chairman, President and CEO

Lewis Chew – SVP of Finance and CFO

Analysts

Christopher Caso – Susquehanna Financial

Stacy Rasgon – Sanford Bernstein

Craig Ellis – Caris & Company

John Pitzer – Credit Suisse

Ross Seymore – Deutsche Bank

Shawn Webster – Macquarie

Christopher Danely – JP Morgan

James Schneider – Goldman Sachs

Brendan Furlong – Miller Tabak

Tore Svanberg – Stifel Nicolaus

Presentation

Operator

Compare to:
Previous Statements by NSM
» National Semiconductor CEO Discusses F1Q2011 Results - Earnings Call Transcript
» National Semiconductor Corporation F4Q10 (Qtr End 05/30/10) Earnings Call Transcript
» National Semiconductor Corporation F3Q10 (Qtr End 02/28/10) Earnings Call Transcript

Good afternoon. My name is Marvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the National Semiconductor Q2 FY 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Thank you. I would now like to turn the call over to our host Mr. Mark Veeh. Sir, you may begin your conference.

Mark Veeh

Thank you, Marvin, and welcome everyone to National Semiconductor's second quarter fiscal year 2011 earnings conference call. Joining me on the call today is our Chief Executive Officer, Don Macleod; and our Chief Financial Officer, Lewis Chew.

During our prepared section of this call, we will be providing details around our Q2 results, background to our Q3 outlook and some commentary around our recent market trends and business environment. At the end of our prepared comments, we will then take questions until approximately 2.30 PM Pacific Time.

As we begin our call, I would like to remind everyone that today's discussions will contain forward-looking statements that involve risk factors that could cause National Semiconductor's results to differ materially from management's current expectations. Please review the safe harbor statement contained in the press release published today as well as our most recent SEC filing for a complete description of those risks.

Also in compliance with SEC Regulation FD, this call is being broadcast live over our Investor Relations website. For those of you who have missed the press release or would like to replay the call, you can find it by going to National's IR website, at www.national.com/invest.

So, with that, I will now turn it over to Don.

Donald Macleod

Thanks, Mark. Thank you. So, today, I want to focus my comments on three areas. First, I will talk about the current market situation and give our view on how the quarter progressed and why we're guiding our forward revenues down 8% to 12% and I'll talk about the assumptions that we make regarding market and channel activity for that revenue assumption.

Second, I'll cover our actions to address the current situation, what we're doing about our manufacturing capacity utilization, our inventory plans and our variable expense management plans. Lastly and more importantly, I will update you on progress on some of the medium term revenue growth areas, especially those areas that we highlighted in our recent financial analyst meeting that we held here in November.

So, under the first topic, what did we see in our business trends in the quarter? As you can see from our press release, our sales were down by $22 million over the first quarter. Going into this quarter, we made two significant assumptions. One was that our distributor resales or sales out buy [ph] them of our products would be up sequentially over the first quarter. Given that our distributors in the Americas, Europe and Asia Pacific have represented an aggregate greater than 60% of our revenues, the channel both through its resales and their inventory holdings are a major driver of our numbers.

Now, looking back over the quarter, our overall distributor resales were about the same as they were in the first quarter. Regionally, they were up sequentially in Europe, they were down in the Americas and in Asia Pacific. In particular, for the Americas and Asia Pacific, resales were a little short of our expectations in the month of November, and this was attributed by them to be partially due to slower than expected sales to their EMS customers, and to some extent, this was driven by better availability and perceived shortening of lead times.

If we look at our shipments to the distribution channel in Q2, we shipped in $25 million less than we shipped to that same distribution channel in the preceding first quarter, and remember, I started this commentary by indicating that our overall Company sales were down sequentially this quarter by $22 million, i.e., the reduction in sequential sales to our distributors accounted for more than all of our total reduction.

Looking forward to our third quarter, we expect our distributor resales to decline over the second quarter. A significant contributor to this is the fact that there are less working days in the quarter due to the number of holiday days between Christmas, New Year and the Lunar New Year.

Accordingly, we expect to ship to the channel about $25 million to $30 million less than we did in the second quarter, both to accommodate the seasonally slower resale pattern, and to reduce the inventory levels presently carried by our distributors.

During the second quarter, our distributor inventory dollars did increase and Lewis will go into this in more detail later. So, to summarize, in our distribution channel, we did see some slowing in our business in the Americas and to a lesser extent in Asia Pacific, and given this we now have a much more aggressive inventory reduction plan built into our Q3 revenue guidance.

The second significant assumption we made going into this last quarter was that our shipments to the mobile phone market would increase sequentially. Looking back on the quarter, our actual sales into this handset market were down slightly over the first quarter.

Also, our business grew sequentially with two of the top three customers in this market. We did see some of our customers in the handset market push out previously scheduled deliveries going through the quarter.

Read the rest of this transcript for free on seekingalpha.com

Loading ...