National Semi Cuts Loose More Operations - TheStreet

National Semiconductor (NSM) shares were off slightly Tuesday after the chipmaker announced the sale of a unit that will trim the company's top and bottom lines in 2006.

Santa Clara, Calif.-based National Semi announced late Monday it was selling its PC Super I/O business to Taiwan-based

Winbond Electronics

for an undisclosed sum. Last week, National Semi announced the planned sale of a test and assembly plant in Singapore that employs 1,000 workers.

National Semi is trying to narrow its focus to its analog microchip operations. The PC Super I/O business makes chips used to control peripherals connected to a computer. These commodity chips generate lower gross margins than National Semi's overall average.

Analyst Ross Seymore with Deutsche Bank estimated that the I/O business generated margins between 30% and 40%. National's margins in

its fiscal third quarter, which ended on Feb. 27, were 52.7%, and it has a long-term margin goal of 60%.

The deal is expected to close during the current quarter. Seymore estimated a sale price between $75 million and $100 million in cash and said in his Tuesday research note that the company's gross margins would increase between 0.75 and 1 percentage point.

Still, the unit accounts for about 4% of overall sales, and Seymore reduced slightly his fiscal 2006 earnings target to $1.02 a share from $1.04, while his sales target went to $1.97 billion from $2.05 billion. His price target remained at $23, as did his hold rating. Deutsche Bank owns shares of National Semi.

The shares were recently down 35 cents, or 1.7%, to $20.86.