Texas Instruments’ Forecast Falls Short on Japanese Demand
April 18, 2011, 6:45 PM EDTBy Adam Satariano and Ian King
(Updates with analyst’s comment in fourth paragraph.)
April 18 (Bloomberg) -- Texas Instruments Inc., the largest analog-chip maker, forecast second-quarter revenue and profit that fell short of some analysts’ estimates as lower Japanese demand and falling mobile-phone chip sales hurt orders.
Profit in the current quarter will be 52 cents to 60 cents a share on sales of $3.41 billion to $3.69 billion, the Dallas- based company said in a statement today. That compares with the average analyst prediction of 63 cents in profit on $3.53 billion of sales, according to a Bloomberg survey.
Texas Instruments, whose earnings provide a broad guide of demand across the electronics industry, said the March 11 earthquake and tsunami in Japan curbed local demand and cut output at the plants it operates, as well as those of its customers and suppliers. The disaster cost the company $20 million in revenue in the first quarter. Sales of so-called baseband chips used in mobile phones also declined.
“This is the first big guy to report how they were impacted” by the Japan earthquake, said Doug Freedman, an analyst at Gleacher & Co. in San Francisco. He rates Texas Instruments shares “buy.”
Texas Instruments slipped to $34.12 in late trading after the announcement. The stock earlier dropped 20 cents to $34.79 at 4 p.m. on the New York Stock Exchange. The shares have advanced 7 percent this year.
Japan’s Impact
The company will have a better read on how long business will be affected by the earthquake later in the quarter, Chief Financial Officer Kevin March said in an interview today. Texas Instruments gets about 10 percent of sales in Japan.
First-quarter net income rose to $666 million, or 55 cents a share, from $658 million, or 52 cents, a year earlier, the company said today in a statement. Sales increased to $3.39 billion. Analysts on average predicted per-share earnings of 58 cents and revenue of $3.39 billion.
Texas Instruments is the biggest maker of analog chips, which go into everything from e-book readers to industrial air conditioners. These chips perform functions such as power regulation and the conversion of touch and sound into electronic signals. As more everyday items such as dishwashers and cars have added electronic functions, older analog technologies have resurged.
Baseband Revenue
Templeton is getting the company out of the market for digital-signal processors that manage radio functions in mobile phones -- an area Texas Instruments once dominated, as the main supplier to Nokia Oyj. Revenue from those baseband chips dropped by $100 million in the first quarter, or $50 million more than expected, the company said.
The shift may accelerate in coming quarters, said Tristan Gerra, an analyst at Robert W. Baird & Co. in San Francisco, who has a “neutral” rating on the shares and doesn’t own the stock.
“The company has still got about $1.7 billion of revenue from baseband, and that goes to zero by the end of 2012,” Gerra said.
The chipmaker announced April 4 that it agreed to buy rival National Semiconductor Corp. for about $6.5 billion to advance its push into analog semiconductors.
In March, Texas Instruments said “substantial damage” to one of its plants in Japan caused by the earthquake would hurt sales in the first and second quarters. The plant in Miho, Japan, produced about 10 percent of Texas Instruments’ output by revenue. The company has switched work to other facilities and aims to bring the damaged factory back to “full shipment capability” in September.
Events in Japan are expected to reduce earnings per share by 5 cents in the current quarter, the company said.
Texas Instruments ranked second behind Santa Clara, California-based Intel Corp. among U.S. chipmakers in total sales last year.
--Editors: Jillian Ward, Nick Turner
To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
