National Cuts More Costs with Sale of PC Super I/O Biz

Online staff -- Electronic News, 3/15/2005

In support of its ongoing efforts to streamline operations, National Semiconductor Corp. Monday announced it signed a definitive agreement to sell its PC Super I/O business to Winbond Electronics Corp., based in Hsinchu, Taiwan.

Last Thursday, National announced it would sell its test and assembly operations in Singapore to cut costs and focus on core products.

As part of yesterday’s agreement, Winbond is to acquire intellectual property, assets and approximately 150 employees, most of which are based at National’s research and design center in Herzlia, Israel.

The PC Super I/O business unit’s products include the SafeKeeper trusted I/O desktop and notebook devices, keyboard controllers and Server I/O devices. This business accounts for approximately 4 percent of National’s current quarterly revenues.

“This sale benefits both companies,” said Brian Halla, chairman, president and CEO of National, in a statement. “National is committed to focusing on its core analog portfolio. Winbond, meanwhile, is well positioned to leverage our digital and mixed-signal IP with their established line of products for the computer, laptop and server markets.”

The sale is expected to close during National’s fiscal Q4.

The investment community viewed the sale to Winbond positively.

“We view the sale constructively as [National] continues to de-emphasize lower-margin products and focus on high-performance analog,” noted financial analysts Simona Jankowski and Andrew Root, in a report from Goldman Sachs this morning.

“We believe this product line had margins in the range of 35 percent for gross and 10 percent for operating, compared to 53 percent and 21 percent for the corporate average,” the report continued.

“The sale fits strategically with other recent [National] actions, including the March 10 announcement of intent to sell the Singapore assembly and test site, and the August 24, 2004, sale of the imaging business."

Goldman Sachs also adjusted its estimates for the sale starting in fiscal Q1 2006 to $1.89 billion from $1.97 billion.