With pricing on discrete devices falling at a steeper rate than expected, General Semiconductor, Melville, N.Y., is
warning investors that its earnings in the second half of 1998 could be more than 40 percent below the first half of this year.
The supplier of discrete semiconductors reported a 3.5 percent increase in net sales to $98.8 million in second quarter, ended June 30,
compared to $95.5 million in the same period last year. General Semiconductor SEM said its operating income for the quarter was $15.6 million compared to pro forma $18.8 million in 1997, before restructuring charges. Second quarter earnings per share were $0.19
compared with pro forma $0.24, excluding the charges in the period last year.
In the first half of the year, General Semiconductor's net income was $16.3 million, or $0.44 per share, on net sales of $205.2 million
compared to a net income of $9.5 million, or $0.28 per share, on revenues of $180.9 million.
"The outlook for electronic components has continued to deteriorate, and capacity utilization remains low," said Ronald A. Ostertag,
chairman and CEO of General Semiconductor, which was spun out of General Instruments last summer.
"Despite the challenging environment in the market for discrete components, we performed relatively well due to the strength of our
operations and our market positioning," Ostertag said. "Our business is always tightly controlled, but we have taken additional steps
to ensure that our costs are adjusted in response to the reduced order level and continued price pressures. At the same time, we
continue to manage our business to ensure that we remain well positioned to respond to the turnaround in business when it occurs, and
to benefit from opportunities as they arise."
Earlier this year, General Semiconductor expressed cautious optimism about the strength of the European and American market, which the
company thought might offset weakness in Asia. But the markets have suffered a more general slowdown, causing General
Semiconductor to revise its outlook.
Pricing on discrete semiconductor products was previously expected to decline 6 percent to 8 percent from 1997, but the soft market conditions
are now expected to push down average selling prices by nearly 10 percent this year, said the company. Moreover, orders are
expected to remain soft for the rest of the year, resulting in pressure on profit margins in the second half of 1998.