National Semiconductor Corp. F1Q10 (Qtr End 08/30/09) Earnings Call Transcript

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2009-09-10 21:10:26.0

Tags: Barclays Plc., Call Transcript, Earnings, Caris & Co., National Semiconductor Corp., Seasonality, Financial Accounting, Finance, Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Craig Ellis - Caris & Co.

Craig Ellis - Caris & Co.

Lewis, regarding the outlook for the gross margins, can you talk a little bit about how much of the uplift is coming from higher volume or from mix or other factors?

Lewis Chew

It's probably fair to say that we've actually assumed mix being relatively stable. So the improvement that we're projecting in the range that I gave of 62% to 63% is primarily driven by volume-related drivers as well as improvement we get because we're finishing off the closure of the China plant, and we get some benefit from that.

Craig Ellis - Caris & Co.

I know that the economic backdrop is a little bit tough to be thinking too far out but how would you think about normal fiscal third quarter seasonality?

Lewis Chew

You win the prize, because sometimes people wait until the end, so you ask it right at the beginning. It's not that we didn't anticipate that wouldn't be asked. So I actually took a look over the last, say, 18 to 20 years of the company, about 65% to 70% of the time, that is typically a down quarter for some very natural reasons.

You know, we sell—Don went over the composition of our revenue in some of the vertical markets that we serve, and it's not uncommon right after the Christmas season to see some of those volumes drop off by anywhere from 10%, 15%, some years 20%. So I think the normal seasonality tracking would be down in that quarter. But as Brian said, it's way too early to have visibility that far out. But just to get that on the table, the normal trend would be for down post-Christmas.

Operator

Your next question comes from Romit Shah - Barclays Capital.

Romit Shah- Barclays Capital

If I remember correctly, the majority of your trends orders typically come from distribution. If I'm right in saying that, we're just starting to see that business recover. So I'm trying to understand why you're sending flatish turns. Do you expect your distis to drive inventories down even further?

Lewis Chew

First of all, the turns from distis did increase significantly in the quarter than we just finished and we're much higher than we thought. So our current expectation is that they will continue to run at these higher levels. So we're not anticipating any pull back from that.

 

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