Updated from 7:17 a.m. EDT
gave investors a mixed bag of news after the closing bell Monday, but investors focused on the positive, and pushed the stock up strongly in early trading.
The chipmaker beat Wall Street's consensus for third-quarter earnings by 5 cents a share.
However, the company's expectations for the fourth quarter were not as sanguine, as revenue at the high end of the company's forecasted range will barely touch the current analysts' estimates.
"It was a neutral quarter at best," commented Thomas Kurlak, a former technology analyst and hedge fund manager who now contributes to
But investors seemed to be focusing on the just-completed quarter. In early trading Tuesday, the stock was up $1.39, or 6.6%, to $22.50.
Third-quarter revenue was $3.25 billion, a year-over-year increase of 28%. Including a tax benefit, the company earned $563 million, or 32 cents a share. Analysts polled by Thomson First Call were expecting a profit of 27 cents a share on sales of $3.16 billion.
A year ago, the company earned $447 million, or 25 cents a diluted share, on revenue of $2.53 billion.Operating profit rose to $657 million from $249 million a year earlier.
Semiconductor revenue was flat sequentially, but up 31% from a year ago, the company said.
Inventory -- a sore point across the sector for several months -- was up sequentially by $71 million to $1.36 billion from $1.29 billion. Roughly 70% of that was due to production of wireless products for the fourth quarter; the rest resulted from decreased demand, said CFO Kevin March. Management said the company is slowing production, and that inventories should be down by the end of the year.
The company said a lower tax rate contributed 3 cents a share to earnings, a penny was due to higher nonoperating income, and 3 cents came from a change in profit sharing accrual.
TI lowered the bar in September,
warning investors that as a result of weakened semiconductor growth, it expected third-quarter revenue to range between $3.1 billion and $3.24 billion, down from the prior range of $3.2 billion and $3.44 billion.
The company was far from alone in its warning; numerous other chipmakers, including
, also preannounced third-quarter disappointments. In most cases the culprits were slow demand and attempts by customers to reduce inventories.
`Looking at the fourth quarter, the company expects total revenue to range from $2.96 billion to $3.2 billion with earnings of 24 cents to 28 cents a share, a sequential decline in sales. Some of the decline, said March, is seasonal, reflecting slower sales of calculators to students. However, while semiconductor sales will sometimes make up for the end of back-to-school season, they won't this quarter, March added. In the corresponding quarter in 2003, total sales were $2.77 billion.
Analysts were projecting revenue of $3.2 billion and EPS of 26 cents for the quarter.
Before TI's earnings announcement Monday, Merrill Lynch analyst Joseph Osha reiterated his "sell" rating on the stock, saying "we disagree with the notion that our outlook is already factored into TXN's stock price. At 23x our 2005 estimate into slowing revenue growth and declining margins, the stock looks rich to us." (Merrill has or is seeking an investment banking relationship with TI.)
Consensus estimates, however, give both Texas Instruments and Intel a price-to-earnings ratio of 18 in 2005.
is trading at 23 times 2005 estimates.