Texas Instruments' Profit Jumps

"The whole wireless market was seasonally better than we normally get in the first quarter," said CFO Kevin March. "We usually see our wireless revenue decline in the first quarter. In this quarter they were flat."

In addition to strong demand for 3G handsets and the low-end cell phones popular in countries like China and India, TI also saw gains from the infrastructure side of the cell phone business, where it sells chips for wireless basestations. According to TI, sales of communications infrastructure equipment increased nearly 50% sequentially.

For the current quarter under way, TI said total revenue will range between $3.46 billion and $3.75 billion, with EPS between 38 cents and 43 cents a share.

Analysts polled by Thomson First Call were expecting second-quarter EPS of 36 cents on sales of $3.48 billion.

TI executives said the company had resolved the majority of the inventory issues it experienced in the fourth quarter, when insufficient testing and assembly equipment prevented the company from meeting all of its customer demand.

In the first quarter, TI managed to increase inventory both within the company and within the distribution channels, while cutting back delinquencies in its order fulfillment.

"There are a few pockets that we would still like to be doing better on, but we are definitely heading in the right direction," said March.

The company's gross margin rose to 50.1% in the first quarter, up from 44.9% in the year ago period, and 48.3% in the fourth quarter.

Much of this gain was the result of divesting itself of the lower-margin sensors and controls business, which the company sold for $3 billion in January . Margins also got a boost from the increasing mix of high-margin high performance analog chips within the company's product portfolio. In the first quarter, high performance analog revenue rose 43% year over year.