Fairchild Semiconductor said the company's fourth quarter revenues are tracking ahead of original projections provided by the company during its third quarter earnings conference call.
Earlier, the South Portland, Maine company projected fourth quarter revenues to be down 4-6% sequentially and stated that if it had stronger turns business (orders booked and shipped within the quarter) it could beat that guidance. "Turns business has been seasonally strong through October and November, and we now expect fourth quarter revenues to be flat to down 3% sequentially," Fairchild said today.
"Our strongest orders have been from desktop, notebook, display, power supply and consumer segments. Our worldwide distribution channels remain relatively lean, as resales climbed slightly in October compared to September, while inventories decreased slightly. Distribution inventories at the end of October dropped below 13 weeks.
"The pricing environment has remained very aggressive as much of the business is very deal-driven, and we are battling for every large order. We now expect overall pricing for fourth quarter shipments to be down 3-4% sequentially, with heavier declines in our low voltage power discretes and standard logic product lines. Our turns orders have been a little more heavily weighted toward the lower margin portion of our portfolio.
"Due to this price erosion and shift in product mix, we now expect gross margins could be sequentially down as much as 100-200 basis points this quarter. Previously announced cost reductions we initiated early in the quarter, which included employee reductions and temporary manufacturing shutdowns, are helping to offset this gross margin decline. We believe the current First Call consensus estimate for our fourth quarter pro forma earnings of $0.07 per share is challenging, but achievable, and will depend on our turns orders and revenues in December," the company said.
"Our visibility into the first quarter remains limited. Our current 13-week and 26-week backlogs are at roughly the same levels they were when we entered the fourth quarter. Unless we have an exceptionally strong Christmas sell through, we would anticipate first quarter 2003 revenues to be down, following our industry's typical seasonality. If demand in our end markets continues to rebound, we expect to return to more normal quarterly growth patterns through the remainder of 2003 and believe our internal programs to improve our product mix, further reduce manufacturing costs and increase our manufacturing insourcing will drive our gross margin percentage into the high 20s by the end of 2003."
Fairchild expects to report its fourth quarter and full year financial results on January 16.