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Texas Instruments Tightens Sales Forecast

The sale of a business will boost quarterly profit.

Updated From 4:50 p.m. EDT


Texas Instruments

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tightened its financial forecast for the third quarter, but kept the midpoint of its guidance unchanged.

In its midquarter update Tuesday, the Dallas chipmaker said that business was proceeding according to its initial expectations, with high-performance analog chips, as well as chips tied to the PC industry, enjoying particularly strong demand.

But the picture in the wireless market continues to be mixed. Although sales of chips for cell phones are growing, they are being affected by problems among certain customers, TI Investment Relations Manager Ron Slaymaker told analysts during a conference call.

"Not all customers are pulling evenly. We certainly have some customers that are running stronger than others," he said.

While Slaymaker didn't name names, his comments were clearly referring to handset maker



, which has seen its

sales stall in recent quarters.

Shares of TI were down 1.9%, or 67 cents, to $35.05 in extended trading Tuesday.

Dallas-based TI said that revenue in the third quarter will range between $3.56 billion and $3.72 billion, vs. its previous estimate of $3.49 billion and $3.79 billion.

The midpoint of the new guidance is $3.64 billion, the same as for its initial guidance and slightly below the average analyst expectation of $3.66 billion in revenue, according to Thomson Financial.

TI raised its initial guidance for EPS of between 46 cents and 52 cents to a new range of 49 cents and 53 cents.

TI said the new guidance included a 2-cent gain from the sale of its DSL equipment business to German chipmaker



, which closed in July. Excluding that gain, TI's midquarter EPS has the same midpoint as its initial guidance.

Shares of TI are down about 8.5% since mid-July, as investors have fretted that competitors are eating into TI's base of cell-phone customers.

Last month,


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, the world's No. 1 maker of handsets, said that it would admit chipmakers





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into its club of preferred component suppliers.

During TI's conference call with analysts Tuesday, Slaymaker said the company is benefiting from a parallel trend in which cell-phone makers like Nokia and


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are jazzing up phones with sophisticated features and interfaces. Those trends bode well for TI's application processor business, said Slaymaker.

TI is shifting engineering resources to its application processor business, which can bring in between $10 and $12 of revenue per phone, compared to the $5 per phone that TI's single-chip product for low-end phones generates, according to Slaymaker.

Slaymaker also noted that sales of TI's mixed-signal chips used in PC hard drives and printers are also on track for a strong performance in the third quarter. The comments underscore the perception of strength in the PC industry, and

echo recent comment from numerous other companies.