STOCKREPORTS

National Semiconductor Corporation

NYSE Symbol NSM In S&P 500

Recent Price 35.19 52 Wk Range 35.19 - 14.38

Yield Nil 12-Mo. P/E NM

Quantitative Evaluation: Outlook (1 Lowest - 5 Highest) 1- Fair Value 27.20 Risk MEDIUM Earn/Div Rank B-
Technical Evaluation: BULLISH since 08/96 Rel. Strength Rank (1 Lowest - 99 Highest) 89 Insider Activity NA

Overview 30-JUN-97

Sales in FY 98 (May) are expected to rise some 20% from restated year ago levels (to exclude the company's sold Fairchild business). We project expansion of NSM's gross margin during the fiscal year, to approach 45% by the fourth quarter of FY 98, which compares with a range of 37.4%-43.6% during FY 97 (also restated). We project an improvement in the company's SG&A spending during the course of the year, to the 14% range, down from more than 16% in FY 97. The tax rate is expected to remain at an effective rate of 25% during FY 98, leading us to our earnings per share estimate for the year of $1.75. Our preliminary FY 99 EPS estimate is $2.25.

Valuation 30-JUN-97

We continue to recommend holding NSM shares. We believe the company should continue to benefit from demand for its analog/mixed signal technologies from growth in networking, personal systems, communications. Furthermore, NSM's spinoff of its Fairchild unit should also enable the company to focus on higher-margin products, yielding significant EPS leverage. However, with the shares trading at roughly 18X our FY 98 EPS estimate of $1.75, NSM's P/E is about on par with its peers, and is reasonable given the roughly 15% average annual EPS growth we forecast over the next several years. We therefore view the shares as appropriately valued for the near term and recommend holding positions.

Key Stock Statistics

Fiscal Year Ending May 31

Dividend Data: No common dividends have ever been paid. A poison pill stock purchase rights plan was adopted in 1988.

Business Summary 30-JUN-97

National Semiconductor's President and CEO, Brian Halla, has been at the helm since May, 1996. Mr. Halla has headed the final stages of a restructuring of the company, which commenced in 1992, and has spearheaded an effort to form a "new" National Semiconductor. NSM's expertise has been primarily in analog intensive, digital and mixed-signal complex integrated circuits. In June of 1996, NSM spun off its logic, memory and discrete product groups (considered more commodity-type components) as a separate company, called Fairchild Semiconductor. The spinoff was targeted at enabling NSM to focus on its core analog and mixed-signal businesses.

The company's leading analog and mixed signal products are used in products for local area networks (LANs), wireless networking and wireless communications, personal systems and personal communications, and amplifiers. NSM with its system-level chip solutions, is one of the leading suppliers of LAN Ethernet products, and supplies the 10/100 physical layer interface (PHY) and LAN transreceiver (Twister) chips. NSM has an integration partnership with leading adapter card maker 3Com, and supplies its chips to hub, switch and router manufacturers. NSM also provides chipset solutions for (personal computer) I/O (input/output) devices, which consolidate many dependent functions on the motherboard.

Mr. Halla is often quoted saying information is analog, and analog is a key strength of NSM. Analog and mixed signal products process analog information, convert analog to digital or convert digital to analog. Analog devices control continuously variable functions (such as light, color, sound and power) and are used in automotive, telecommunications, audio/video and many industrial applications.

NSM's sales to Analog markets were some 37% of sales in FY 97, excluding Fairchild, while Communication & Consumer markets (its LAN/WAN products) were 44%, and Personal Systems were 19%.

The company's strategic imperatives communicated to the investment community, include: world-class manufacturing; state-of-the-art process technology; and six-month time-to-market methodology. NSM's recent major investment, a new 8-inch wafer fab in South Portland, Maine, is expected to begin volume production in the fall of 1997. NSM also has a major wafer fabrication facility in Scotland.

Capitalization

Long Term Debt: $324,300,000 (05/25/97).

Curr. Ratio	NA	1.9	1.7	1.8	1.7	1.3	1.5	1.5	1.5	1.6
% LT Debt of Cap.	NA	18.1	5.5	1.3	4.2	5.8	2.9	7.2	5.7	3.5
% Net Inc.of Revs.	NA	7.1	11.1	11.3	6.5	NM	NM	NM	NM	2.5
% Ret. on Assets	NA	7.6	13.3	15.2	9.8	NM	NM	NM	NM	3.7
% Ret. on Equity	NA	12.8	23.4	31.3	23.4	NM	NM	NM	NM	6.2

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--2900 Semiconductor Drive, Santa Clara, CA 95052-8090. Tel--(408) 721-5000. Chrmn, Pres & CEO--B. Halla. VP-Fin & CFO--D. Macleod. VP & Secy--J. M. Clark III. Investor Contact--James Foltz. Dirs-- G. P. Arnold, R. Beshar, B. Halla, M. A. Maidique, E. R. McCracken, J. T. O'Rourke, C. E. Sporck, D. E. Weeden. Transfer Agent & Registrar--First National Bank of Boston. Incorporated--in Delaware in 1959. Empl-- 20,300. S&P Analyst: Megan Graham Hackett

This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P nor any other party guarantee its accuracy or make warranties regarding results from its usage. Redistribution is prohibited without written permission. Copyright © 1997