Bloomberg News

Texas Instruments’ Sales Forecast Misses Analysts Estimates

October 24, 2011

(Updates with executive comment in fourth paragraph.)

Oct. 24 (Bloomberg) -- Texas Instruments Inc., the largest maker of analog semiconductors, forecast lower fourth-quarter sales than some analysts had estimated, indicating that demand for electronic components remains sluggish.

Revenue will be $3.26 billion to $3.54 billion in the period, the Dallas-based company said today in a statement. Doug Freedman, an analyst at RBC Capital Markets, had estimated $3.57 billion for the period. This is the first quarter that Texas Instruments is including its National Semiconductor Corp. acquisition in the forecasts. That transaction closed Sept. 23.

Texas Instruments gets most of its revenue from analog chips -- semiconductors that are key components in everything from missiles to washing machines. That makes its earnings an indicator of demand across the economy. Revenue improved throughout the third quarter and the rate at which orders declined slowed from July to September, indicating the slump may be approaching its lowest point, said Chief Financial Officer Kevin March in an interview.

“We think that a bottoming process has begun,” he said. “It’s hard to say that we can declare victory and we’ve achieved a bottom yet.”

Texas Instruments’ stock declined 30 cents to $31.39 in late trading. It had climbed 4 percent today at the close in New York, leaving the shares down 2.5 percent for the year.

‘Tough Quarter’

“I’d need to see further evidence before making a call on whether we’ve reached the bottom,” said Bill Kreher, a St. Louis-based analyst at Edward Jones. He recommends buying the stock and said he doesn’t own Texas Instruments shares. “I think Texas Instruments executed well throughout a tough quarter.”

Profit in the fourth quarter, including costs related to the acquisition of National Semiconductor, will be 28 cents to 36 cents a share, the company said.

“Economic uncertainty continues to weigh on demand in almost every major market segment in which we operate,” Chief Executive Officer Rich Templeton said in the statement.

Third-quarter profit fell to $601 million, or 51 cents a share, from $859 million, or 71 cents, a year earlier. Revenue declined 7.3 percent to $3.47 billion.

On Sept. 8, Texas Instruments said profit in the third quarter would be 56 cents to 60 cents a share on sales of $3.23 billion to $3.37 billion, citing a slump across its product lines.

Largest Customers

Three of Texas Instruments’ largest customers are Avnet Inc., Arrow Electronics Inc. and WPG Holdings Ltd. -- all distributors of electronic components -- which account for a combined 21 percent of the company’s sales, according to Bloomberg data.

Texas Instruments ranked second behind Santa Clara, California-based Intel Corp. among U.S. chipmakers in total sales last year. The company has pared back its mobile-phone radio-chip business to focus on analog semiconductors, which can convert real-world input such as sound and touch into electronic signals. Analog chips also regulate power within devices.

--Editors: Donna Alvarado, Niamh Ring

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


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