Bloomberg News

Texas Instruments Predicts Sales That Miss Est.

July 23, 2012

Texas Instruments Inc. (TXN:US), the largest maker of analog chips, forecast third-quarter sales and profit that may miss some analysts’ estimates as an economic slowdown in Europe crimps demand for electronics.

Profit will be 34 cents to 42 cents a share on revenue of $3.21 billion to $3.47 billion, the Dallas-based company said today in a statement. Analysts on average had predicted earnings of 43 cents on sales of $3.53 billion, according to data (TXN:US) compiled by Bloomberg.

Texas Instruments earnings (TXN:US) are seen as an indicator of demand across the broader economy because its chips help power devices as diverse as fighter aircraft, household smoke detectors and mobile phones. The traditional increase in consumer spending in the second half of the year may not materialize as shoppers in Europe curb purchases, said Tore Svanberg, an analyst at Stifel Nicolaus & Co.

“Consumer markets are lower than seasonal,” said Svanberg. “Anything related to Europe has deteriorated quite significantly.”

Texas Instruments shares (TXN:US) were little changed in extended trading following the announcement. They had earlier fallen 1.6 percent to $26.82 at the close in New York, leaving the stock down 7.9 percent this year.

Second-quarter net income declined to $446 million, or 38 cents a share, from $672 million, or 56 cents a share, a year earlier, the company said. Sales dropped 3.6 percent to $3.34 billion.

Order Clarity

After slowing orders in June, customers are giving the company fewer indications than normal of how they intend to buy parts in September, making it more difficult for the company to make forecasts, Chief Financial Officer Kevin March said in a telephone interview. Concern about how the economy may affect sales is making clients more likely to rely on last-minute orders from Texas Instruments’ stockpiles, he said.

“Both our direct customers and the distribution channel have very, very lean inventory levels right now,” he said. “We’re probably shipping to end demand. The issue here is a lack of clarity.”

Texas Instruments sales typically grow about 6 percent in the third quarter from the preceding three months, March said. In the second quarter, Asia delivered “healthy demand,” with Japan and the U.S. also growing, while Europe declined, he said.

Parts for digital televisions and cars were down. Demand for mobile-phone processors also fell, as a couple of the company’s customers struggled, he said.

Electronics Distributors

Avnet Inc. (AVT:US), Arrow Electronics Inc. and WPG Holdings Ltd., three of Texas Instruments’ largest customers, are all distributors of electronic components. They account for more than 20 percent of the company’s sales, according to supply- chain data compiled by Bloomberg (TXN:US).

Texas Instruments was once the biggest maker of digital signal processors, or DSPs, for mobile phones through its relationship with Nokia Oyj. The Finnish phonemaker has decided to diversify by using other suppliers, and Texas Instruments is exiting the baseband DSP business.

The company is still in the phone market via its OMAP processors that run programs in smartphones and tablets and it supplies other chips that provide connectivity to handsets.

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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Companies Mentioned

  • TXN
    (Texas Instruments Inc)
    • $54.23 USD
    • -0.24
    • -0.44%
  • AVT
    (Avnet Inc)
    • $43.51 USD
    • -0.03
    • -0.07%
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