Texas Instruments Rises After Exceeding Estimates: Dallas Mover
January 30, 2012, 5:38 PM ESTBy Ian King
Jan. 24 (Bloomberg) -- Texas Instruments Inc. rose almost 5 percent in extended trading after fourth-quarter sales and profit declined less than analysts had predicted, signaling that the market for electronic components has bottomed out.
Net income fell 68 percent to $298 million, or 25 cents a share, from $942 million, or 78 cents, a year earlier, the Dallas-based company said yesterday in a statement. Sales dropped 3 percent to $3.42 billion. Analysts had predicted profit of 23 cents a share and revenue of $3.25 billion on average, according to data compiled by Bloomberg.
Texas Instruments is the world’s largest maker of analog chips -- semiconductors that are key components in everything from satellites to refrigerators -- making its earnings a broad indicator of demand across the economy. While the company isn’t predicting a surge in orders, the industry may be nearing the end of a sales slump. Texas Instruments also is closing down two plants, a move that may save $100 million a year.
“Inventories are really low and customers are starting to order again,” said Tore Svanberg, an analyst at Stifel Nicolaus & Co. in San Francisco. He recommends buying shares of Texas Instruments, which he owns himself.
Texas Instruments traded as high as $34.70 in extended trading after the announcement. The stock, down 10 percent in 2011, had closed at $33.19 in New York.
‘At the Bottom’
First-quarter revenue will be $3.02 billion to $3.28 billion, the company predicted. Analysts on average had estimated $3.22 billion. Profit will be 16 cents to 24 cents a share, Texas Instruments said. The company completed its $6.4 billion purchase of National Semiconductor Corp. in September, so the most recent period is the first full quarter to reflect the acquisition’s financial performance.
“We are positioning ourselves for a resumption of growth in the second quarter,” Chief Financial Officer Kevin March said in an interview. Customers are beginning to replenish their inventories of chips, he said. Still, “it’s a little early for us to declare victory.”
The company has been phasing out its wireless baseband products, which serve as the communications processor in mobile phones, letting it focus on more profitable areas. Revenue from that market will drop to $75 million in the first quarter from $279 million in the previous three months, March said. Excluding those sales, the company expects revenue to decline about 2 percent, compared with a typical sequential drop of 4 percent.
The company plans to shut down chip factories in Houston and Japan over the next 18 months because upgrading the plants would be too costly. The move, which affects about 1,000 workers, will result in one-time expenses of about $215 million.
Avnet Inc., Arrow Electronics Inc. and WPG Holdings Ltd., three of Texas Instruments’ largest customers, are all distributors of electronic components. They account for a combined 18 percent of the company’s sales, according to supply- chain data compiled by Bloomberg.
--Editors: Nick Turner, Stephen West
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
