March 11 (Bloomberg) -- National Semiconductor Corp. plans to cut more than 1,700 jobs, about a fourth of its workforce, as the recession eats into sales at the maker of mobile-phone chips.

The company will eliminate 850 positions now and 875 over the next few quarters, according to a statement today. The reductions will occur in areas including manufacturing, sales and marketing, National said. The company also will shut plants in China and Texas.

Sales this quarter will drop as much as 10 percent from the previous period as customers curb spending to cope with the economic slump, National said. The global economy may shrink for the first time since World War II as trade declines, according to a report this week from the World Bank. National’s chips are used by companies such as Nokia Oyj, the world’s biggest maker of mobile phones.

“The worldwide recession has impacted National’s business as demand has fallen considerably,” Chief Executive Officer Brian Halla said today in a statement. “The actions we announced today will help us remain competitive.”

The chipmaker indicated today that sales may fall as low as $263.2 million in the current quarter from $292.4 million in the period ended March 1. Analysts predict sales of $292.5 million on average, according to a Bloomberg survey.

National, based in Santa Clara, California, fell 32 cents to $11.38 at 4 p.m. in New York Stock Exchange composite trading. The stock has gained 13 percent this year.

Net Income

Net income in the fiscal third quarter fell to $21.1 million, or 9 cents a share, from $72.9 million, or 29 cents, a year earlier, the company said today. Sales dropped 36 percent in the three months ended March 1.

Analysts projected a loss of $12.4 million, according to the average of estimates in a Bloomberg survey. National said profit was helped by a tax benefit of $11 million. The job cuts will cost between $160 million and $180 million, according to the statement. Some $130 million to $145 million of those expenses will be recorded this quarter, it said.

To contact the reporter on this story: Julie Alnwick in New York at jalnwick@bloomberg.net

Last Updated: March 11, 2009 16:21 EDT