National Semi warns
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May 14, 1998: 5:12 p.m. ET
Company says inventory corrections may result in operating loss
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NEW YORK (CNNfn) - Computer chip maker National Semiconductor Corp. Thursday warned a slowdown in personal computer shipments is expected to result in an operating loss this quarter and a possible loss next quarter.
In a statement issued after trading in New York had closed, the company said sales for the fourth quarter ending May 31 are expected to decline by as much as 20 percent from the previous year's fourth quarter.
First Call Research Corp., which tracks analysts' estimates, forecast a loss of 19 cents a share for the fourth quarter although it is currently projecting a profit of 3 cents a share in the first quarter.
"Shipments in the current quarter have been slowed by inventory corrections in the personal computer market, with many customers slowing their factory build rates," the company said.
"While customers indicate they expect to complete these inventory corrections in their June quarter, current order rates have not yet reflected that improvement," the company added.
National Semiconductor (NSM) shares closed down 1-15/16 to 18-7/8.
National also said problems with product transitions in its local area network business will continue through the summer. The company warned business in that unit might not return to normal levels until the fall.
The earnings warning comes after the company announced in late April it was cutting 1,400 jobs, or 10 percent of its work force, due to softness in the semiconductor market.
When it announced the layoffs, the company also said it would take a one-time charge between $60 million to $70 million before taxes, or 27 cents to 32 cents per share after taxes, in its fourth fiscal quarter ending May 31 for the job cuts and other costs.
The charge includes approximately $25 million for severance and lease terminations.
National Semiconductor had been struggling due to dwindling demand from Southeast Asia, particularly South Korea.
The chipmaker caused a stir earlier last month when it announced plans to combine most of the chips used in personal computers onto a single chip, which could drive prices of new computers below $500.
National Semiconductor expects the chip to be available by mid-1999.
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National Semiconductor
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