Updated from 5:01 p.m. ET

Chipmaker

Texas Instruments

(TXN) - Get Report

Monday missed Wall Street's estimates for fourth-quarter earnings by two cents per share. Revenue also came up short. In addition, the company said this quarter's revenue will decline by 10% from the fourth quarter.

TI reported earnings of 31 cents a share, whereas analysts had expected 33 cents a share. That 31 cents a share is down from 33 cents in the third quarter but up from 25 cents in the year-earlier quarter. Revenue came in at $3.03 billion, off the expected level of $3.15 billion. It also was down from $3.16 billion in the third quarter but up from $2.64 billion in the year-earlier quarter.

Coming in a season of earnings warnings and misses, the news was still a bit of a surprise to analysts and investors who had expected TI to meet its numbers.

Merrill Lynch

analyst Joe Osha, for instance, put out a note Monday saying he didn't expect a miss, though he also said he saw no chance for an upside surprise. (Merrill hasn't done underwriting for TI.)

TI said that customers working through excess inventory will push revenue down 10% in the first quarter from the fourth. Sectors hurt by this inventory adjustment include the company's wireless division, as handset customers continue to absorb chip inventory. Digital signal processor and analog products are expected to be flat from the fourth quarter.

The company also said it would decrease spending on equipment and factories by about 18% in 2001, to $2.3 billion from $2.8 billion. Initially due to spend about the same amount in 2001 as 2000, TI said it has cut spending that would've taken place in the year's second half. Wall Street has been skeptical about some competitors going through with their plans to actually increase spending this year, but semiconductor equipment stocks

have rallied in recent weeks anyway on hopes that they will.

Texas Instruments Chief Financial Officer Bill Aylesworth painted a relatively bleak picture Monday of the potential turnaround in the chip market, blaming the current problems not just on inventory but also on the economy and weak consumer spending. He said during a conference call that the inventory levels at some of the company's customers wouldn't work themselves out until the second quarter's end.

"I don't think there's any reason to try to give assurance that it will be completed by the end of the first quarter," Aylesworth said.

These inventories, as well as weaker demand among consumers, meant that customers began sharply decreasing orders late in December and have continued to do so in January, he said. In particular, inventory for TI has been rising in the wireless sector. Revenue in that sector fell about 15% from the third quarter to the fourth quarter and will decline at least that much in the first quarter from the fourth quarter, he said.

Aylesworth declined to comment on the company's forecast for 2001 beyond the expected first-quarter revenue decline.

TI had been considered to be in a better position than chipmakers like

Intel

(INTC) - Get Report

and

Advanced Micro Devices

(AMD) - Get Report

, both of which mainly make chips for PCs, a lousy market these days.

Dell

(DELL) - Get Report

, for instance,

warned Monday that its earnings wouldn't be up to snuff in the fourth quarter ended Feb. 2.

TI, meanwhile specializes in chips for cell phones and wireless applications, considered a stronger market. (

TheStreet.com

looked at this issue recently.) And it was this focus that was expected to make it easier for TI to get through these tough times in the chip market.

Now it's clear that while its emphasis on cell phones means it won't suffer as much as the PC makers this year, TI still is looking at serious issues, at least in the first quarter, as the depth of the handset inventory becomes apparent.

Motorola

(MOT)

, a maker of both chips and cell phones, recently

lowered its outlook for 2001 cell-phone production. Another clue about this market's direction will come Friday, when cell-phone maker

Ericsson

(ERICY)

is scheduled to report quarterly results.

TI shares lost $1.75, or 3.5%, to finish regular trading Monday at $48.56. The results came out after regular trading closed.