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New National CEO turns focus on revenue growth

Posted: 16 Mar 2010 ?? ?Print Version ?Bookmark and Share

Keywords:National revenue growth? power? analog? wafer fab?

Focus: revenue growth
So why is revenue growth more important now. "In 2003 we had gross margins of 35 percent and were investing in the leading edge wafer fabs for digital technology such as x86 processors and communications devices. Our 0.18?m technology was the second production line at this geometry in the industry. "When we changed to being an analog company our capital investment dropped for 20 percent to 5 or 6 percent of sales and the investors liked this 'careful with capital' thee."

"So we focused on gross margins and these went from 35 to 65 percent from 2003 to 2008. We did a good job but in doing that we compromised our growth and our priority was return on investment. We adopted a business model where revenue growth per se was not a premier objective."

"In pursuing margins we were selective in the business areas we focused on avoided opportunities where margin was not as rich such as the PC market segment."

"Our margin model going forward reflects that when you have 65 to 68 percent gross margins you do not need to push the business model to discourage business to go above that and Wall Street does not give you credit for it, they are much more interested in you generating more top line growth. The way the markets treat the semiconductor industry today is that the companies that demonstrate revenue growth get the most multiples. That has changed, at the beginning of the decade the companies with the best margins achieved the best multiples, no longer is that adequate."

"While we are not focusing on margin growth, cost reductions such as the closure of the Arlington fab in May provide savings on the fixed running costs which will automatically give us a 3 percent margin boost."

"We are a relatively unique semiconductor company in that we make most of our products in-house. We build near to 100 percent of our own wafers and 95 percent of our backend test and assembly. With our 50 to 60 percent wafer fab utilization it makes sense to pursue business opportunities to grow the top line. The benefits you have when you own your own manufacturing is that the incremental costs of running one more wafer is relatively low as opposed to having to go outside and buy the product from somebody which is what most of the companies in the industry do today. "If you have a wafer fab that is 50 percent utilized for every extra dollar that we produce, 80 percent falls through to the gross margin as you have already paid for the fixed cost."

Growth opportunities
"We have the unique opportunity to almost double the size of our company without building any more wafer fabs. Which means we can pursue business more aggressively. So how do you now achieve revenue growth and what products can get National there. The company first introduced its Simple Switcher power management devices in 1990 and is now on its fifth generation.

"Last year we shipped to 25 000 different customers, 90 percent through the distribution channel and each month 25 000 engineers do designs and simulations online. So now we are investing and reinvigorating one of the core competencies of Simple Switcher by introducing modules. Since we launched these in January the traffic on our website has increased by over 20 percent with over 32 000 designs a month being carried out.

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