Bulls will argue the results were in line with expectations. While this is true, it also followed a 13% decline in fourth-quarter revenue, which also followed a 2% decline in the third quarter. The pattern is anything but subtle. Nevertheless, despite this being the sixth consecutive quarter of revenue declines, investors are still coming to TI's defense. At best, the results were mixed when looking at each segment. Analog sales were down 2% year over year and down 8% from the fourth quarter. Although there were some positives such as 4% year-over-year increase in Embedded sales, it also fell 3% sequentially. Interestingly, though, one of Texas Instruments' strongest performers came from its wireless business. Unfortunately, the company has exited that business altogether, ceding that market to (among others) Qualcomm and Broadcom ( BRCM). The fact that the wireless business is still performing this well (on a relative basis) should raise more questions as to whether or not it was a wise move for management to exit that market in the first place.
I'm willing to give management credit for having established a sound business model, which is producing $3 billion in free cash flow. The question is to what extent can management propel the company further by focusing solely on analog chips? While it does appear that the cash is coming in handsomely, including a 16% year-over-year increase in the first quarter, the fact that gross margin declined does not inspire confidence. This is while operating income also declined by about 1%, missing Street estimates by almost 5%.