Updated from 5:12 p.m. EDT

Brisk worldwide demand for cell phones boosted profit at

Texas Instruments

(TXN) - Get Report

by 57% in the first quarter.

The Dallas chipmaker's financial results for the three months ended March 31 came in ahead of analysts expectations and at the high end of its own estimates. And the company's outlook for the current quarter suggested that business was not showing any signs of slowing down.

"Demand was strong, and we expect it to continue," said CEO Rich Templeton in a statement.

Sales in the first quarter were $3.33 billion, up 23% from the year-ago period.

Net income jumped to $585 million, or 36 cents a share, including a 4-cent-a-share stock-based compensation expense and a profit of $43 million from discontinued operations. In the year-ago period, TI earned $411 million, or 24 cents a share, excluding stock-compensation charges but including net income of $40 million from discontinued operations.

On a continuing-operations basis, TI earned $542 million, or 33 cents a share, in the latest quarter. Analysts polled by Thomson First Call expected TI to generate $3.29 billion in sales with EPS of 32 cents.

Shares of TI rose 3.4%, or $1.14, to $35.14 in extended trading Wednesday.

The company said revenue from chips used in advanced, so-called 3G cell phones doubled year over year. Sales of analog and digital signal processors used in cell phones also showed robust growth in the quarter.

Revenue in Texas Instruments' semiconductor division, which accounts for the bulk of the company's sales, were $2.62 billion during the quarter, at the high end of its projected range of $3.15 billion and $3.28 billion.

While weakness in the market for personal computers has clouded the business outlook for microprocessor makers like

Intel

(INTC) - Get Report

and

Advanced Micro Devices

(AMD) - Get Report

, TI is profiting from its position as the world's No.1 supplier of chips for cell phones.

Nokia

(NOK) - Get Report

, which is TI's largest customer, recently boosted its projections for worldwide handset sales growth in 2006 from 10% to 15%.

"The whole wireless market was seasonally better than we normally get in the first quarter," said CFO Kevin March. "We usually see our wireless revenue decline in the first quarter. In this quarter they were flat."

In addition to strong demand for 3G handsets and the low-end cell phones popular in countries like China and India, TI also saw gains from the infrastructure side of the cell phone business, where it sells chips for wireless basestations. According to TI, sales of communications infrastructure equipment increased nearly 50% sequentially.

For the current quarter under way, TI said total revenue will range between $3.46 billion and $3.75 billion, with EPS between 38 cents and 43 cents a share.

Analysts polled by Thomson First Call were expecting second-quarter EPS of 36 cents on sales of $3.48 billion.

TI executives said the company had resolved the majority of the inventory issues it experienced in the fourth quarter, when insufficient testing and assembly equipment prevented the company from meeting all of its customer demand.

In the first quarter, TI managed to increase inventory both within the company and within the distribution channels, while cutting back delinquencies in its order fulfillment.

"There are a few pockets that we would still like to be doing better on, but we are definitely heading in the right direction," said March.

The company's gross margin rose to 50.1% in the first quarter, up from 44.9% in the year ago period, and 48.3% in the fourth quarter.

Much of this gain was the result of divesting itself of the lower-margin sensors and controls business, which the company

sold for $3 billion in January . Margins also got a boost from the increasing mix of high-margin high performance analog chips within the company's product portfolio. In the first quarter, high performance analog revenue rose 43% year over year.

CFO March said there was additional gross margin headroom in the months ahead as TI's increasing reliance on third-party chip manufacturers results in lower capital spending levels.