Running your own factories can pay off sometimes. Fabless semiconductor design has become an accepted business model, and major chip companies like Texas Instruments
The decision to move away from in-house factories and into third-party foundries like Taiwan Semiconductor Manufacturing
Everyone, that is, except National Semiconductor
This quarter's net income included $6.4 million in restructuring charges, as the company recently simplified its operating model a bit; also, the year-ago period saw $11 million of one-time tax benefits. Despite that double negative for year-over-year comparison purposes, earnings jumped from $0.09 per share to $0.22 per share.
National's book-to-bill ratio has stayed above the critical 1.0 mark for several periods in a row, which points to either manufacturing issues or a strong order pipeline. The plants are cruising at about 50% utilization, and they should be in the low-60s after some upcoming capacity closures. The sweet spot for cost-effective operations lies around 75% utilization for National, which leaves room for margin expansion as demand continues to fill the order books.
Since National makes a significant part of its sales in the mobile handset market, with major customers such as Apple
National is a small fish in a big sea of semiconductor stocks, and perhaps overlooked by most investors. Only 287 players have given the stock a rating in Motley Fool CAPS, where it is a lowly two-star ticker today (out of five). Texas Instruments is a four-star stock on the strength of more than 1,500 votes. Is that fair, considering TI's manufacturing shortages and National's lack thereof? Swing by CAPS today and set the record straight with your own ratings.
Fool contributor Anders Bylund owns shares of AMD, TSMC, and a selection of other fine acronyms, but he holds no other position in any of the companies discussed here. Apple and NVIDIA are Motley Fool Stock Advisor choices. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.