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Texas Instruments Sounds Tenuous Note

Updated from 5:23 p.m. EST

Slumping chip demand pressured Texas Instruments' (TXN) sales in the fourth quarter, with revenue down 8% sequentially.

And while the Dallas chipmaker said it believed the chip market's current correction will be short-lived, TI guided first-quarter results below current estimates and said it plans to cut about 500 jobs to lower costs.

TI said revenue in the fourth quarter totaled $3.46 billion, slightly ahead of Wall Street's dampened expectations of $3.42 billion.

TI had net income of $668 million, or 45 cents a share, up from $650 million, or 40 cents a share, a year ago.

The results included a 5-cent-a-share benefit from the reinstatement of a federal research tax credit as well as a one-cent benefit from new patent license agreements.

Excluding those results, TI's EPS was 39 cents a share, a penny higher than Wall Street expectations, and at the high end of its guided range of between 37 cents and 40 cents a share.

TI credited its strategy of outsourcing some of its manufacturing to third-party chip factories, or foundries, for its stable profitability during a period of "unseasonably weak" demand.

TI pared back its expectations for the fourth quarter in December , citing a slowdown in demand and rising inventories among distributors.

On Monday, TI said that sales for analog and DSP chips -- the company's two largest businesses -- suffered in the fourth quarter. DSP sales fell 11% sequentially because of lower demand for wireless products, while analog chip sales were off 4% sequentially to a broad-based decline in demand.

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