Updated from March 6Texas Instruments ( TXN) bumped up the low-end of its profit expectations and tightened its sales forecast for the current quarter, as better-than-expected sales of communications chips added to the company's finances. The Dallas-based chipmaker said after the bell Monday that it expects to earn between 31 cents and 33 cents a share in its first quarter, compared with its previous guidance of 29 cents to 33 cents. Revenue for the quarter will range between $3.22 billion and $3.35 billion. That's a narrower range than its initial forecast of $3.11 billion to $3.38 billion in first-quarter sales. The midpoint of the new guidance is $3.28 billion vs. the previous $3.24 billion midpoint. Analysts have been expecting the company to come in at the high end of the guidance, with the average estimate calling for revenue of $3.27 billion and EPS of 32 cents, according to Thomson First Call. In early Friday trading, the stock slipped $1.26, or 3.9%, to $31.07. TI's shares had gained nearly 11% in the previous five days after the publication of a couple of bullish notes from Wall Street analysts suggesting that the company would boost its guidance. In a conference call with analysts after the announcement, TI investor relations chief Ron Slaymaker acknowledge TI has been hampered by a lack of back-end assembly and testing equipment, preventing the company from meeting all of its customer orders on time. "I can't say when we're going to be exactly on top of delinquencies, but in general we are making progress," said Slaymaker. According to him, TI has been adding testing and assembly equipment and was taking steps to build product inventory both within the company's own warehouses, as well as among its customers. While TI's guidance may not have been as strong as some on the Street were hoping, it follows the dire warning issued by Intel ( INTC) last week, in which the world's largest chipmaker said that sales in the first quarter could be as much as $500 million less than it initially anticipated.
The increasingly fierce competition with rival Advanced Micro Devices ( AMD) is partly to blame for Intel's revenue shortfall. But it's also clear that the PC market, for which Intel remains the dominant supplier of microprocessors, is not as hot as other semiconductor markets such as consumer electronics and cell phones, where TI plays. In a report released last week, industry research firm Gartner said sales of cell phone handsets in the first quarter were on target to increase between 19% to 23% year over year, according to preliminary data. Gartner said worldwide cell phone sales in 2005 totaled 816.6 million units, up 21% from 2004. PC sales in 2005 increased 15.3%. TI has said it is benefiting from a two-pronged trend in the cell phone business, with the company seeing demand for chips it produces for high-end, so-called 3G phones, as well as for the low-cost handsets that are catching on in developing nations. Slaymaker pointed to wireless sales as the primary area of better-than-expected demand so far this quarter. He said sales of chips for cell phone handsets as well as wireless infrastructure equipment were areas of strength. The midpoint of TI's new forecast represents a 8.6% drop in revenue from the fourth quarter, in keeping with the seasonal slowdown typical of the beginning of the year. Compared with the same period a year ago, however, TI's sales would be up 10.4% if the guidance holds up. TI did not provide specific details on its bookings this quarter, but Slaymaker said that orders suggested strong demand for the second quarter of the year. "Every region is tracking ahead of our expectation on incoming orders thus far through the quarter," said Slaymaker.