today reported third-quarter earnings that beat analysts' forecasts, but a portion of its gains came from venture-capital investments.
Investors reacted coolly to the results, and the stock was trading down 3 7/16 at 81 3/16 in late afternoon trading.
The Dallas-based semiconductor company said that excluding special charges, it earned $420 million, or 51 cents a diluted share, in the latest quarter, up from $164 million, or 22 cents, a year earlier. Analysts surveyed by
First Call/Thomson Financial
had expected earnings of 43 cents a share.
Net income more than doubled, to $383 million, or 47 cents a diluted share, from $155 million, or 19 cents a diluted share, in the 1998 quarter.
But Charlie Glavin, who covers semiconductors for
Credit Suisse First Boston
, noted that the earnings of 51 cents included 7 cents from investments that Texas Instruments made in several digital signal processor companies, mostly through its venture capital fund. Consequently, on an operating basis, he said, the company came in only a penny above the consensus estimate, at 44 cents, although this was his expectation.
Moreover, Texas Instruments' results benefited from a favorable comparison with the 1998 third quarter, when the semiconductor industry was experiencing difficulties.
The company's revenue for the quarter rose 13%, to $2.39 billion from $2.11 billion a year earlier.
Analysts said the semiconductor giant's stock came under pressure mostly because investors have grown to expect that companies in the communications sector will handily beat the Street's estimates. In addition, there is talk of pricing pressure in the disk drive area, which is Texas Instruments' second-biggest business by end market.
But that does not worry most analysts. Lucas Ward, an analyst at
Hambrecht & Quist
, has confidence in the company going into 2000. "It's a fantastic investment. In a short period of time, it's become the new bellwether for semiconductors and will continue to do well from an earnings standpoint," he said.
Adds CSFB's Glavin, "TI is a supertanker with a lot of momentum." He attributes their success to four factors: the strength of their end markets, the introduction of new products like an ADSL product, growth of their often-overlooked catalog analog business and continuing operating margin expansion.