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IDCC, National Semiconductor Trending Up

Posted on Friday, Jun 6th 2008

National Semiconductor (NYSE: NSM) reported its Q4 and fiscal year 2008 results that beat analyst estimates and also gave a strong forecast. Earlier coverage is available here, here, and here.

Q4 revenue was $462 million, up 1% y-o-y and 2% q-o-q. Net income, including $9 million restructuring charges for the 130 layoffs in April, was $83 million, or 34 cents per share, versus $90.1 million, or 28 cents last year. Analysts estimated earnings of 26 cents per share on revenue of $449.5 million. Driven by increased focus on high end analog products, strong manufacturing performance with 70% fab utilization and cost cutting efforts, its gross margin increased to a record 65.9% from 64.3% in Q3. It repurchased shares for approximately $224 million in the quarter and also declared a dividend of $0.06 per outstanding share of common stock.

Fiscal 2008 revenue was $1.89 billion, down 2%. Net income was $332 million, or $1.26 EPS, compared to net income of $375 million or $1.12 EPS in fiscal 2007. Its gross margin increased to 64.4% from 60.7% in 2007.

NSM sales to the Mobile Phones market grew 7% y-o-y and about 2% sequentially and account for one-third of its revenue. Sales to the communications network market, account for 10% revenue and grew 12% both y-o-y and sequentially.

Product-wise, Power Management accounted for 47% of its sales and grew 6% sequentially. Amplifiers, accounting for 24% sales, grew 9% sequentially while Interface and Data Converter product sales were flat sequentially at about 8% and accounted for 5% sales. Application Specific analog products sales account for 4% revenue and were down about 15%.

National had a 12% sequential jump in bookings in Q4 compared to cancellations and other negative activity last quarter. Q4 had higher orders from the distribution channel as well as more bookings for wireless handsets and personal mobile devices.

For Q1 FY 2009, National expects revenue between $460 and $475 million, higher than analyst estimate of $451.22 million. It also expects to achieve 15% to 20% earnings per share growth this fiscal year. It is currently trading around $23 with a market cap of around $5.5 billion.

Chart for National Semiconductor Corp. (NSM)

Another company that has given a strong forecast is the licensing company Interdigital (IDCC), which is probably best known for its 7-year licensing deal with Apple. Interdigital is going to be a strong beneficiary of the 3G iPhone as it gets paid by both Apple (for licensing 3G) and Infineon (royalty for its 3G chip). No wonder, Vijay values it at $75. In his detailed analysis, Vijay looks at the probability of IDCC as an acquisition target for Qualcomm and TI.

On May 7, InterDigital (IDCC) reported its Q1 results that beat analyst estimates. Revenue was down 17% to $56.0 million. Net income was also down to $7.3 million, or $0.15 per diluted share from $17.7 million, or $0.34 per diluted share in Q1 2007. Analysts estimated $0.08 EPS on revenue of $55.5 million. It repurchased about 1 million shares for $17.5 million.

Operating expenses grew 3% to $45.1 million. Of these, patent litigation and arbitration expenses grew 3.6% to $5.7 million. Recurring patent licensing royalties increased to $53.3 million, offset by the decline of 2G revenues from Sony Ericsson. Major customers include LG (25%), Sharp (19%) and NEC (10%). It signed two new 3G patent licenses with manufacturers in Taiwan, bringing its total 3G patent licensees to over 25.

Its technology solutions revenue doubled to $2 million with the licensing of its SlimChip 3G modem technology to a leading Asian semiconductor manufacturer. Apart from its deal with Infineon, Interdigital also stands to benefit from its deal with NXP especially with NXP entering into a joint venture with ST Microelectronics, which is a supplier for Nokia. So, though it is entangled in a legal wrangle with Nokia, we might see IDCC technology in Nokia phones.

On May 21, InterDigital announced its financial guidance for Q2. It expects revenue between $58.5 and $59.5 million with recurring patent licensing revenue between $56.2 and $56.7 million. Technology solutions revenue is expected in the range of $2.0 to $2.5 million. Analysts expect revenue of $57.8 million. It is currently trading around $26 with a market cap of $1.2 billion.

Chart for InterDigital, Inc. (IDCC)

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