If there's an upside to a period of tough sales performance, it's that the next year's comparisons get that much easier.
Such would seem to be the case for large analog chip company National Semiconductor (NYSE:NSM). While the prior four quarters were pretty hairy, the company now seems poised to post some respectable growth off that lower base.
Revenue for the company's fiscal second quarter climbed about 21% over last year's result, and about 10% sequentially. Strong handset and mobile electronics demand helped the power management business post a solid result, though all major segments were up on a sequential basis.
The company also continued to make progress with its margin improvements. Focusing on higher-value products led to a roughly 660-basis-point improvement in gross margins. Operating margin (adjusted for certain gains in the year-ago quarter) also improved nearly 12 full percentage points.
National Semi sells a variety of chips in the wireless handset market, which makes up about one-third of the company's business. Investors familiar with other companies in the handset industry, like Nam Tai (NYSE:NTE) or OmniVision (NASDAQ:OVTI), know that it's a good place to be these days. That won't last forever, but I don't think we're at a precipice, either.
I've grown increasingly interested in following this stock, partly due to the emails I've received from ex-National Semi employees. They've written to decry the corporate culture and strongly suggest that any improvements in the business would be fleeting. Now, I realize it's not unusual for former employees to take swipes at the company, but it's intriguing for me to hear essentially the same stories from different people.
I'm not really in a position to say whether my correspondents are right about potential problems within the company. However, we can all see the numbers, and those are looking pretty good -- better sales, better margins, and a seemingly logical focus on higher-value products and better capital management.
I may not favor National Semi as much as competitors like LinearTechnology (NASDAQ:LLTC) or Maxim (NASDAQ:MXIM), or other semiconductor players like Silicon Labs (NASDAQ:SLAB), a Motley Fool Hidden Gems pick and one of my current investments. Still, I think the table is set for at least a few quarters of good-looking financial performance here. Every Fool must of course do his or her own due diligence, but so long as consumers still want portable electronic gadgets, there could still be more growth ahead for National Semi.
For more Foolish takes on the semiconductor space:
- Quite a Quarter for OmniVision
- Nam Tai's Error of Margin
- National Semi's Long Road Back
- Silicon Labs: Chips, Cheap
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Fool contributor Stephen Simpson owns shares of Silicon Labs, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).
