TI to Sell Chip Unit (Update)

SAN FRANCISCO -- Texas Instruments(TXN Quote) said it was preparing for sales to decline during the next two quarters amid a weakening global economy, and announced plans to offload a portion of its cell phone chip business.

TI said Monday that it is in discussions with several companies about the sale of its so-called merchant cellular baseband business, which provides off-the-shelf modem chips for handsets.

TI will continue to sell customized baseband chips, the largest segment of its wireless chip revenue, and said that it will focus its wireless efforts going forward on the applications processors used in high-end smart phones.

The move is expected to shave one-third of the operating expenses, or roughly $200 million, from its wireless business, and is among a variety of steps TI is taking to weather the global economic downturn. TI said it will reduce its manufacturing activity in order to burn off excess chip inventory, while trimming capital expenditures and limiting new hires.

"Our outlook for the fourth quarter is for revenue to decline substantially based on weak order trends over the past few months," said CEO Rich Templeton in a statement.

The company projected revenue between $2.83 billion and $3.07 billion in the current quarter -- well below the $3.34 billion expected by Wall Street analysts. And TI said it was assuming a further decline in the first quarter of 2009.

TI said EPS would range between 30 cents and 36 cents, vs. the 42 cents that the Street was looking for.