Updated from 6:51 p.m. EDT

Mobile-phone makers expected to put on the brakes in the first quarter, but supplier

Texas Instruments

(TXN) - Get Report

stepped up its sales instead, producing better-than-expected financial results and a bullish revenue forecast.

After the close of regular trading on Monday, TI posted a first-quarter loss of 2 cents a share, compared with a profit of 13 cents a year earlier, according to generally accepted accounting principles. But those figures included restructuring charges, acquisition costs and in-process R&D. Excluding the items, the company reported a pro forma profit of a penny a share in the first quarter, ahead of Wall Street's break-even forecast.

Signaling that its key chip segment is rebounding, Texas Instruments notched a reading of 1.0 for its all-important book-to-bill ratio in the quarter. That means that it already has booked future business coming down the pipeline. Technology players have been complaining for almost a year about the lack of visibility into future quarters.

That lack of visibility has been apparent at TI since the third quarter of 2000 in the form of book-to-bill ratios under 1.0. "Clearly we and the industry were struggling for quite a period of time in 2001 with shrinking orders and backlogs," CFO Bill Aylesworth told

TheStreet.com

. "We think we've turned the corner."

In another sign of TI's good feelings about its business, the company told investors Monday to expect a 10% increase in second-quarter revenue, well ahead of analysts' estimates, along with a 6-cents-a-share profit.

The communications chipmaker reported $1.83 billion in revenue for the first quarter ended March 31, cruising past expectations.

In January, Texas Instruments reported that its fourth quarter was the low point in its revenue slump and would be followed by a slow revival. The fourth quarter saw renewed health in wireless sales, but that wasn't expected to push marked improvement at the open of 2002.

TI said revenue in the first quarter would be flat with the fourth quarter's $1.786 billion and promised to raise gross margins 8% to stop its losses. The company was actually able to improve gross margins by 10% to 33% in the quarter.

A much better inventory situation in 2002 can provide TI with a boost before customers rebound. While mobile-phone makers aren't expecting any sales sparks until the second half of 2002, TI plans to see the positive effects of cleared-out inventories immediately.

Handset vendors started 2001 with 50 million of the 380 million handsets they shipped already on the shelves. Even if the worldwide mobile-phone shipment number doesn't hit the projection of 420 million to 440 million units made by cell-phone leader

Nokia

(NOK) - Get Report

, TI will benefit from the fact that there was perhaps two weeks of inventory in the channel to begin 2002.

While wireless unit shipments slipped slightly in the first quarter, revenue grew 12% sequentially and year over year. TI managed that feat by raising the percentage of wireless revenue from 2.5G technology from 15% to 25%. More 2.5G shipments mean better average selling prices for the chipmaker, and Aylesworth expects 2.5G sales to hit 50% of TI's wireless business by the end of the year.

On the cost side, TI's factory utilization rates are steadily improving, rising from 45% utilization in the third quarter to 50% in the fourth, on up to 60% in the first quarter. The company is looking for another 10% jump in the second quarter en route to optimal levels above 90%.

Texas Instruments slashed its budget for equipment spending from $1.8 billion in 2001 to $800 million in 2002, as its manufacturing space sits idle. Despite the jump in utilization, TI stuck with its full-year figure -- the company spent only $120 million of its budget in the first quarter and expects spending to rise as it grows 300 mm manufacturing capacity.