Citing growing demand across its full range of semiconductor products,

Texas Instruments

(TXN) - Get Report

reported a 27% increase in its third-quarter earnings per share, meeting analysts' expectations.

Still, the results failed to give the Dallas-based semiconductor maker's shares a boost. They had fallen $3.56, or 8.9% to close at $36.63 in regular trading after an influential analyst, Dan Niles of

Lehman Brothers

, lowered his rating on the stock, citing shrinking demand from the struggling PC business.

After hours, when the earnings report was released, the shares initially fell again to $36.25, according to

Instinet

. The stock is off a 52-week high of $99.75.

Indeed, Texas Instruments indicated that its growth is slowing. "TI expects its semiconductor revenue to grow sequentially by a few percentage points in the fourth quarter," the company said in a statement. But because revenue is expected to decline sequentially in a few business segments, "TI expects the net result to be total revenue in the fourth quarter that is about even with total revenue in the third quarter."

For the third quarter ended Sept. 30, Texas Instruments reported pro forma net income of $591 million, or 33 cents a diluted share. In the comparable quarter last year, net income was $453 million, or 26 cents a diluted share. The results in the latest quarter matched the consensus estimate of analysts polled by

First Call/Thomson Financial

.

Revenue rose 25% to $3.15 billion, compared with $2.52 billion in the year-earlier quarter. Operating profit rose 43% to $745 million compared with $522 million.

Semiconductor orders grew 31%, to $3.28 billion, from $2.511 billion.

Three months ago, the company said it "expects accelerating growth in its semiconductor business in the third quarter and is raising its capital expenditures to support strong customer demand."

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Semiconductor revenue rose 29%, to $2.72 billion, from $2.1 billion a year earlier.

The company's singularity of focus has been impressive, said Dan Scovel, a semiconductor analyst for

Needham & Co.

who no longer directly covers the stock.

"They're positioning themselves as a DSP (Digital Signal Processor) and analog play," he said, using the acronym for digital signal processor, devices designed for performing the mathematics involved in manipulating analog information.

In layman's terms, the company is targeting its efforts on the market for chips that operate handheld devices. It is already the world's leading designer and supplier of digital signal processors and analog integrated circuits, often described as the engines driving the digitization of electronics. The two types of semiconductor products work together in digital electronic devices.

"Everything you hear about is DSP and analog and how DSP and analog relates to the Middle East and how DSP and analog relates to everyday life."

"They've been buying up a lot of competitors in the, surprise, analog space," Scovel said. "Now you've got

Intel

(INTC) - Get Report

sort of rattling the cage. But Intel's a newcomer to that space. It'll be TIs to defend, but it maybe won't be such a cakewalk."

Niles, the Lehman Brothers analyst, lowered his rating from to neutral from outperform before the earnings report was released. He wrote that the catalog analog business, which represents 17% of semiconductor revenue, is constrained by production capacity and that the hard-disk drive business, 6% of revenue, may shrink with the PC industry.

During the day, Niles trumpeted his downgrade on the cable business station

CNBC

.

Semiconductor investors have been worried recently by a seasonal slowdown in consumer electronics sales and softer demand for personal computers.

For Texas Instruments, the new quarter has started with a kind of positive publicity that would be difficult to buy. A retired engineer named Jack St. Clair Kilby, 76, was awarded the Nobel Prize for Physics for his part in cramming transistors, resistors, capacitors into a single block now known as the integrated circuit, or microchip. The prize committee noted that his work in the summer of 1958 at the Dallas start-up touched off a revolution in solid-state physics and a $231 billion industry.