Bloomberg News

Texas Instruments Sales to Miss Estimates as Nokia Orders Drop

June 09, 2011

June 9 (Bloomberg) -- Texas Instruments Inc., the largest analog-semiconductor maker, gave a second-quarter sales and profit forecast that fell short of analysts’ estimates, dragged down by sluggish demand for wireless-phone chips from Nokia Oyj.

Second-quarter profit will be 51 cents to 55 cents a share on sales of $3.36 billion to $3.5 billion, the Dallas-based company said in a statement yesterday. Analysts on average had projected profit of 57 cents on $3.55 billion in revenue, according to a Bloomberg survey.

Texas Instruments gets most of its revenue from analog chips, which go into everything from e-book readers to industrial air conditioners. A decline in orders from Nokia, its main customer for wireless chips, accounted for all of the shortfall in the quarter, Texas Instruments said. The company is exiting the wireless business to focus on analog, which it says will deliver more profitability.

“Nokia’s numbers were awful,” said Doug Freedman, a Gleacher & Co. analyst based in San Francisco. He recommends buying Texas Instruments stock and said he doesn’t own any. “The sooner you get rid of that, the quicker you can pick up the other side of the equation.”

In April, the company had said second-quarter profit would be 52 cents to 60 cents a share on sales of $3.41 billion to $3.69 billion. A year earlier, Texas Instruments had net income of $769 million, or 62 cents, and revenue was $3.5 billion.

Texas Instruments dropped 60 cents, or 1.8 percent, to $32.67 in New York Stock Exchange composite trading yesterday before the forecast. The shares are little changed this year.

Analog Versus Wireless

Analog semiconductors regulate a device’s power and convert touch and sound into electronic signals. As more everyday items such as dishwashers and cars have added advanced functions, older analog technologies have seen a resurgence.

Chief Executive Officer Rich Templeton is getting Texas Instruments out of the market for digital-signal processors that manage radio signals in mobile phones -- an area the company once dominated as the main supplier to Espoo, Finland-based Nokia. On May 31, Nokia said second-quarter sales at its devices and services division would be “substantially” less than forecast.

“The reductions are due to a single wireless customer,” Texas Instruments Vice President Ron Slaymaker said on a conference call yesterday to discuss the forecast. Without the drop in orders from Nokia, Texas Instruments would have been on course for the midpoint of its original forecast range, Slaymaker 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: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net TXN US <Equity> CN


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