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TI Narrows Forecast (Update)

Shares rise as investors avoid negative surprises.


Texas Instruments

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tightened its financial forecast for the current quarter, leaving the midpoint of its guidance unchanged despite growing anxiety about the cell-phone market for semiconductors.

TI said business across its major business lines, including wireless chips, have performed according to expectations halfway through the third quarter.

Those expectations were already lackluster, with TI having warned in July that third-quarter sales would be slower than usual for this time of year. Still, the fact that business has not deteriorated further pushed TI's stock up nearly 5.5% to $22.90 in extended traing.

"We came into this quarter with a subdued outlook for wireless," TI Investment Relations manager Ron Slaymaker told analysts in a conference call Tuesday. "It's largely playing out as we expected," he added later.

The Dallas-based chipmaker said it expects revenue in the third quarter to range between $3.33 billion and $3.47 billion, instead of its previous range of $3.26 billion to $3.54 billion.

Analysts were looking for sales of $3.4 billion, which represents the midpoint of both ranges.

The company said EPS will range between 42 cents and 46 cents, vs. its prior estimate of 41 cents and 47 cents. The average analyst expectation called for 44 cents a share.

TI's shares are off 42% from their 52-week high of $37.17. The stock has slipped more than 10% since last Wednesday, following a slew of negative news that has heightened worries about the health of the cell-phone market.

On Friday,


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, the world's No. 1 cell-phone maker, said it would lose market share this quarter due to its decision not to engage in the price war afflicting the handset market. Two days earlier,


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chief executive noted in an interview that consumers were taking longer to upgrade to new handsets than in the past.

TI has increasingly shifted its focus to analog chips, lessening its dependence on wireless chips as competition in that market heats up. Rivals including


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have begun making inroads into TI's stable of customers.

In Tuesday's midquarter update, TI's Slaymaker revealed more bad news in the company's wireless business, acknowledging that the recently announced joint venture between Ericsson Mobile Platforms and ST-NXP Wireless means TI's own business with Ericsson Mobile Platforms, which was expected to yield revenue in late 2009, was likely dead in the water.

"In terms of future activities that we anticipated, we would not expect those at this point," said Slaymaker.

Slaymaker stressed that TI still expected to continue its strong business relationship providing certain chips for handsets made by the separate Sony-Ericsson joint venture.

TI said it is making progress working down the excess chip inventory that it accrued in the second quarter after distributors unexpectedly pared back their orders, and that it remained on track to return silicon stockpiles to desired levels by year's end.

TI's shipments to distributors this quarter will be about the same or down slightly from the second quarter, said Slaymaker, while TI's factory utilization will be down quarter-on-quarter.

TI did not discuss financial expectations for the fourth quarter, but noted that its orders in the current quarter were down a few percentage points from this time a year ago.