Texas Instruments Senses an Opportunity

Updated from 12:05 p.m. EST

Texas Instruments'(TXN) ongoing effort to slim down to its essentials moved forward Monday, when the company announced the sales of its sensors and controls business for $3 billion.

The sale of one of its three main divisions, accounting for roughly 10% of 2004 revenue, to private equity firm Bain Capital was not unexpected, having been the subject of rumors for weeks.

But while the deal ended speculation about one TI division, it raised more questions about another: the company's well-known calculator business. With TI now even more squarely focused on the cell-phone market, where it is the world leader, the company's Educational and Productivity Solutions group, which accounted for 5% of overall revenue in 2004, sticks out like a sore thumb.

"It's the logical next step," says Stifel, Nicolaus & Co. analyst Cody Acree. "Whether or not we see that happen in the short term is still up in the air, [but] they've got to find a buyer for it," says Acree, whose firm does not have any banking relationship or own shares in TI. And with TI's brand so closely associated with the calculators, the business might not transfer to another company as easily as other divisions.

A TI representative said the company has a longstanding policy of not commenting on speculation about mergers, acquisitions or divestitures of its businesses.

TI's shedding of its sensors and controls division, which makes electronic products found in everything from automobile fuel injection systems to industrial air conditioning units, is the latest step in its strategy of shedding noncore assets. In 1998, TI sold its memory business to Micron(MU).

According to TI, the sale will allow the company to focus more on its core products, while allowing the sensors business the flexibility to grow faster than it would as a second-class citizen at TI, where most of the resources were directed toward the semiconductor group. The deal will not include TI's radio frequency identification, or RFID, business, which will be folded into the semiconductor division.