Fairchild Semiconductor Revenues Ahead of Projections
By Cindy Christ

Fairchild Semiconductor International (NYSE:FCS) powered higher Friday after the chipmaker said first-quarter revenues are running 6 percent higher than the previous quarter, or about twice as fast as projected.

Fairchild shares jumped $5, or 15.7 percent, to $36.88 on the news.

Based in Portland, Maine, Fairchild Semiconductor makes more than 10,000 high-performance products used in consumer electronics, computers, telecommunications, autos and other industries.

"Demand for power, analog and interface products continues to grow, especially for newer products," said Fairchild president and CEO Kirk Pond in a statement.

"This improved mix is pushing current quarter gross margins ahead of our previous guidance," he added.

Pond, speaking at Credit Suisse First Boston's High Yield conference Thursday, predicted that quarterly revenues will continue to grow at 3 to 4 percent per quarter, or about 20 percent for the year.

Pond said that sales of new products, which account for about 28 percent of revenues, are driving accelerated growth.

The company has previously said its goal is to pump up new product sales to 40 percent of revenues.

"Our R&D is targeted at high growth markets across the portable appliance spectrum, including mobile phones, consumer appliances and mobile PCs," Pond said.

Shares in Fairchild have doubled since its August 1999 IPO at $18 a share. Nonetheless, the encouraging report prompted Credit Suisse First Boston analyst Tim Mahon to name Fairchild "the most undervalued stock in our semiconductor universe."

Mahon raised his price target on Fairchild to $52 from $48 per share and upped his fiscal 2000 and 2001 earnings estimates to $1.68 from $1.52 and to $2.10 from $1.90.

Reiterating his "strong buy" rating, the analyst lifted his first-quarter revenue estimates to $382 million from $370 million and earnings per share estimate to 39 cents from 36 cents.

Mahon said the increases are based on growth in demand for new products, for those used in PCs and portable consumer electronics such as mobile phones and laptops, and on improved sales in Southeast Asia.

Earlier this month, Merrill Lynch analyst Eric Rothdeutsch lifted his 12 to 18 month price target on Fairchild to $60 from $54 based on the release of Sony Corp.'s (NYSE:SNE) new PlayStation2, which holds five Fairchild components.

Today, Rothdeutsch reiterated his near-term "accumulate" and long-term "buy" rating on Fairchild shares.

Analyst Erika Klauer at Deutsche Banc Alex. Brown chimed in, reiterating her "strong buy" rating and boosting her 12-month price objective to $68 from $60.

Founded in 1950, Fairchild Semiconductor has played a key role in the development and mass production of the integrated circuit. In 1979 the company was bought by oil services leader Sclumberger Ltd. (NYSE:SLB) and was later acquired by National Semiconductor (NYSE:NSM).

In 1997, Fairchild regained its independence through a leveraged buyout of certain National Semiconductor business units.

In the three years since its split with National Semi, the company has doubled its sales, thanks to a booming recovery in the chip cycle and the acquisition of a manufacturing plant in South Korea from Samsung Electronics.

In a recent interview with CBS MarketWatch.com, Pond said his company aims to command about 10 percent of the $50 billion multimarket segment of the semiconductor industry.

By 2002, the market for semiconductors of all kinds is expected to reach $60 billion.

Last year, Fairchild raised $480 million through an Initial Public Offering of 20 million shares and another $550 million through the sale of 23 million shares in a follow-on stock offering in January.

The company has used the funds to pay down debt and increase research and development spending amid strong competition from rivals such as chip giant Motorola (NYSE:MOT) and recent Wall Street darling STMicroelectronics (NYSE:STM), which has seen its share price rocket more than fourfold over the last 52 weeks.