Updated from 5:01 p.m. ESTTexas Instruments ( TXN) bumped up the low end of its earnings outlook Monday, and said business in the wireless market is stronger-than-expected at this point in the fourth quarter. The Dallas-based chipmaker said December orders for chips used in both high-end cell phones as well as low-priced models have not slackened from prior months, hinting at a healthy holiday sales season for cell phones. TI's encouraging comments about wireless demand follow National Semiconductor's ( NSM) earnings results last week, in which the company reported an 18% sequential increase in sales of cell phone chips. Shares of TI rose 4.5% in recent after-hours trading to $34.15. In its midquarter update, the Dallas-based chipmaker said earnings in the current quarter will range between 50 cents and 54 cents a share vs. its previous guidance of 48 cents to 54 cents. The midpoint of the new range -- 52 cents -- is a penny higher than the average analyst expectation. In a conference call with analysts Monday, TI investor relations head Ron Slaymaker said the company was benefiting from recent operating expense cuts, particularly the decision to outsource the manufacturing process for its digital chips. TI's increasing focus on high-performance analog chips, which carry plump profit margins, is also bolstering the company's bottom line. Slaymaker said demand for analog and high-performance analog chips continues to be solid in the current quarter, in keeping with the company's original projections.
And while fears of a potential industry-wide glut of chips have been haunting some investors, Slaymaker said Texas Instruments believes stockpiles are "lean by any historical measure." Despite the various sources of strength, TI acknowledged that its wireless revenue is still expected to come in below the normal level for this time of year, primarily due to market-share erosion. With cell phone maker Ericsson ( ERIC) purchasing chips from one of TI's competitors in the fourth quarter, TI's wireless sales will take a hit in the fourth quarter. "Wireless is below its seasonal trend," said Slaymaker. "But most of the weakness we're seeing is isolated to Ericsson's 3G program," he said, referring to the company's line of high-end cell phones. TI's shares are down roughly 14% from a 52-week high of $39.63 in July. With overall wireless demand showing strength however, TI tightened its sales forecast, projecting fourth-quarter revenue between $3.5 billion and $3.66 billion. In October, TI had projected that revenue would range between $3.4 billion to $3.68 billion. The new revenue guidance has a midpoint of $3.58 billion, which is slightly ahead of the $3.56 billion expected by analysts polled by Thomson Financial.