You wouldn't expect a quarterly report from a semiconductor designer to sound like a Bernanke speech or a presidential address. But that's what we got from National Semiconductor
No wires, no problem
"Not to disappoint the Chicken Littles in the crowd," Halla started his remarks in the conference call, "but business just isn't that bad."
A richer product mix with more orders for high-margin analog circuits led to record gross margins. Halla said that "the only possible explanation I can come up with is that people are going out to buy new cell phones so they can call their banks and tell them they are not going to default on their mortgages."
Mobile gadgets, including but not limited to Apple
It also helped to have a healthy international customer list in the face of American subprime woes -- the rest of the world hasn't echoed the U.S. financial markets' current volatile state.
So National is happy to reap the benefits of a mobile market on the rebound, thanks to the company's expended analog product portfolio. But greater things should lie ahead, according to management. "The performance of the [analog] peer group has been relatively underwhelming in recent years," Halla said. And he had more salt to rub in the wounds of Analog Devices
Less oil, more money
And thus we segue into another macroeconomic speech. Halla thinks oil prices are headed for $150 or $200 a barrel, and that today's "energy crisis" is merely the tip of the iceberg. Oil prices matter to semiconductor companies, Halla said, because of the enormous amount of energy it takes to run the data centers and global networks we have today.
The server farms that run Google's
"Unless YouTube and the other video-intensive transmission applications are just a passing fad," Halla said, "the estimate of additional server farm capacity over the next four years just to keep up with the growth of this industry will require a doubling of today's capacity, or about 10 additional power plants."
But analog processors can do the signal-processing work of digital DSPs, using a fraction of the logic gates and much less power. Media streams like audio, video, and image data lend themselves easily to this kind of processing, so Halla sees his analog products as a part of the solution to the energy crisis. In other words, as oil prices rise, so should the demand for low-power processors -- like National's.
In a Foolish nutshell
That's all a clever way of explaining the company's margin improvements and 22% earnings growth year over year. National just told us that the holiday season for wireless devices should be great, because the manufacturers have ordered up tons of signal processors. The oil crisis will have a much bigger effect on semiconductors than the subprime meltdown -- but in a good way.
The energy-saving verve might take some time to happen, though, and National's guidance for next quarter wasn't very impressive. But patient investors who think Halla is on to something here might want to take a look at power-saving technology companies right about now. The golden years might lie straight ahead.
Fool contributor Anders Bylund is a Google shareholder, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure will always be there for you.