By Benjamin Pimentel

NEW YORK (Dow Jones) -- National Semiconductor Corp. on Wednesday posted a lower third-quarter profit and announced plans to eliminate more than 1,600 jobs in an effort to cut expenses.

Before the opening bell, the Santa Clara, Calif.-based chip maker reported that quarterly net income fell to $21.1 million, or 9 cents a share, from $72.9 million, or 29 cents a share, in the year-earlier period.

Net sales for the three months ended March 1 fell to $292 million from $453 million in the year-ago quarter.

Analysts had expected National Semi (NSM) to report a loss of 5 cents a share, on revenue of $296.8 million, according to a consensus survey by Thomson Reuters.

Citing current economic conditions, the company set plans to cut 850 positions immediately in product lines, sales and marketing, manufacturing and support functions. It will also shutter an assembly and test plant in China and a wafer-fabrication plant in Texas, resulting in an additional 875 job cuts. These actions represent a 26% reduction in the company's workforce.

"The worldwide recession has impacted National's business as demand has fallen considerably," said Brian Halla, chairman and chief executive officer. "However, the actions we announced today will help us remain competitive as we continue to focus on growing markets that can benefit from our new energy-efficiency initiatives."

National Semi predicted that fourth-quarter sales would decline sequentially by 5% to 10%.

The company reported results as the chip industry reeled from one of the most severe downturns in its history, marked by a steep drop in demand.

Deutsche Bank analyst Ross Seymore said National Semi could benefit from cost-cutting moves and the expected rebound in demand.

"We believe National Semi shares can benefit from additional cost-cutting actions and an eventual cyclical/macro rebound when the current inventory depletion stage ends," Seymore told clients in a research note. "We remained concerned regarding National Semi's ability to produce secular revenue growth, but believe cyclical factors are likely more important drivers for the next year."