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Texas Instruments Sounds Tenuous Note

By Alexei Oreskovic
TheStreet.com Staff Reporter
1/22/2007 5:13 PM EST
Updated from 4:58 p.m. EST

http://www.thestreet.com/_yahoo/newsanalysis/techsemis/10333971.html?cm_ven=YAHOO&cm_cat=FRE...

Slumping chip demand pressured Texas Instruments' (TXN - commentary - Cramer's Take - Rating) sales in the fourth quarter, with revenue down 8% sequentially.
The Dallas chipmaker's near-term future doesn't look much brighter, as the company guided first-quarter results below current estimates and said it plans to cut about 500 jobs to cut costs.

TI said revenue in the fourth quarter totaled $3.46 billion, slightly ahead of Wall Street's dampened expectations of $3.42 billion.

TI had net income of $668 million, or 45 cents a share, up from $650 million, or 40 cents a share, a year ago.

The results included a 5-cent-a-share benefit from the reinstatement of a federal research tax credit as well as a one-cent benefit from new patent license agreements.

Excluding those results, TI's EPS was 39 cents a share, a penny higher than Wall Street expectations, and at the high end of its guided range of between 37 cents and 40 cents a share.

TI pared back its expectations for the fourth quarter in December, citing a slowdown in demand and rising inventories among distributors.

On Monday, TI said that sales for analog and DSP chips -- the company's two largest businesses -- suffered in the fourth quarter. DSP sales fell 11% sequentially due to lower demand for wireless products, while analog chip sales were off 4% sequentially to a broad-based decline in demand.

Shares of TI were up 56 cents, or 2%, to $29.15 in extended trading.
Looking ahead, TI projected first-quarter sales between $3.01 billion and $3.28 billion with EPS between 28 cents and 34 cents. Analysts were looking for $3.30 billion in sales with EPS of 35 cents.

"Challenges continue in the first quarter as we operate in an environment where customers want lower levels of inventory and where growth in the wireless market is skewed to low-priced, basic featured cell phones, instead of higher-priced full-featured phones," CEO Rich Templeton said in a statement.

TI said it will save about $200 million annually by a series of moves including shuttering a digital factory and moving the manufacturing equipment into several of its analog chip plants, as well as collaborating on future manufacturing processes with its foundry partners. The moves will result in the company eliminated about 500 jobs by the end of the year.