National's revised outlook is due to a weakened economy that has led to lower-than-expected shipments to customers in the wireless handset market (which comprised approximately one-third of National's sales in the first quarter) as well as lower shipments to distributors, which service a large number of customers across a broad range of industries and markets.
The global business environment has deteriorated significantly since the beginning of the quarter. New order rates are currently running at a level significantly below what the company saw in the first quarter of fiscal 2009. This drop off in new order rates has been accompanied by lower-than-expected turns orders (orders placed with delivery requested in the same quarter), which was a contributing factor to the revenue shortfall in the current quarter. The lower order rates have also resulted in significantly lower backlog for the upcoming third fiscal quarter, which ends on March 1, 2009.
In light of the uncertain business climate, the company also announced today that it is taking action to cut back on operating expenses. Accordingly, the company will reduce the size of its global workforce by eliminating approximately 330 positions, primarily in non-manufacturing functions. Resources will be re-prioritized toward National's most important growth initiatives, which leverage the company's growing portfolio of PowerWise(R) energy-efficient solutions. This includes recently announced initiatives aimed at improving the efficiency of solar energy systems. National currently employs approximately 7,000 people worldwide.
The company is targeting to save approximately $11 million to $13 million per quarter in operating expenses from this action, of which a large portion should be realized during the third fiscal quarter and the remainder realized in the fourth fiscal quarter. In connection with this action, National expects to incur approximately $30 million of charges, primarily for severance, most of which will be recorded in the second quarter. More information on the company's cost saving actions will be discussed during the second quarter earnings call on Monday, Dec. 8, 2008.
Special Note
This release contains forward-looking statements dependent on a number of risks and uncertainties pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters set forth in this press release, including management's expectations regarding future performance, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include, but are not restricted to, such factors as new orders received and shipped during the quarter, the degree of factory utilization, the sale of inventories at existing prices, and the ramp up and sale of new analog products. Other risk factors are included in the Company's Annual Report on Form 10-K for the fiscal year ended May 25, 2008 under the captions "Outlook", "Risk Factors" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" contained therein and the 10-Q for the quarter ended Aug. 24, 2008.
About National Semiconductor
National Semiconductor creates energy-efficient analog and mixed-signal semiconductors. Its PowerWise(R) products enable systems that consume less power, extend battery life, and generate less heat. Headquartered in Santa Clara, Calif., National reported sales of $1.89 billion for fiscal 2008 which ended May 25, 2008. Additional company and product information is available at http://www.national.com.
Media Contact: Financial:
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