Fairchild Semi Comes Up Short

The company's second-quarter results miss analysts' estimates.
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Fairchild Semiconductor's

(FCS)

latest earnings report fell short of Wall Street's expectations, and investors showed their displeasure with the performance by taking 6% off the company's share price.

For the second quarter ended June 26, Fairchild posted sales of $346 million, a 4.6% decline from the prior quarter and 16.5% lower than the second quarter of 2004. The company lost $205.3 million, or $1.71 a share, compared with a profit of $17 million, or 14 cents a share, in the year-ago period.

The latest quarter includes a $195.3 million charge related to a reserve of deferred tax assets and $3.9 million of restructuring expenses for employee severance and asset impairments. Before the items, Fairchild had a loss of $2.2 million, or 2 cents a share.

Analysts polled by Thomson First Call were looking for a profit of 5 cents a share and sales of $358 million for the second quarter.

Gross margin was 19.9%, 320 basis points lower sequentially and 940 basis points below the prior-year second quarter, the South Portland, Maine, semiconductor maker said.

Shares of Fairchild were down $1 to $15.36.

"We believe we've turned the corner on distribution inventories, and the channel is now better positioned to take advantage of the typically stronger seasonal demand in the late summer and fall," the company said in a press release Thursday. "The volume incentives to increase resales and to reduce slow-moving inventory are in place, and we expect to see the results of these programs in the second half of this year."

For the third quarter, Fairchild expects revenue to be approximately flat and gross margins to be unchanged to slightly higher sequentially. The company said it remains "committed" to meeting its goals of 30% gross margins at the current sell-through sales levels and mid-30% gross margins within two years. The third-quarter consensus revenue estimate is $361.5 million.