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TI Dials It Down

Updated from 5:09 p.m. EDT

Texas Instruments (TXN - Get Report) said sales growth in the last quarter of the year will be less than seasonally expected, as the wireless market that has propelled the company all year shows signs of cooling off.

Monday's anemic outlook is the first time that Texas Instruments, the world's No.1 maker of chips for cell phones, has acknowledged any significant weakness in that key market. Over the course of the summer, several of TI's competitors cut their sales projections citing their customers' rising chip stockpiles.

TI officials stressed that the company was not seeing any fundamental drop in demand for cell phones, adding that their expectations for the industry's total handset unit sales in 2006 had not changed.

Rather, TI said its weak outlook was the result of a slowdown in adoption of the high-end, so-called 3G cell phones, which account for roughly one-third of TI's wireless-chip sales.

"What we're seeing here in the outlook is the mix between the low-end, or relatively inexpensive cell phones, and 3G has shifted," CFO Kevin March said in an interview. "The expectations will be more weighted toward the low end than previously anticipated."

March described the pause in 3G sales as a normal "growing pattern" in the adoption of new cell-phone technology, as demand moves in fits and starts.

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