Wahz: Thought you might like to know what the CEO of TI had to say last night on NBR. (Maybe you've already seen this?)
10/27/03: One On One With CEO Thomas Engibous of Texas Instruments
SUSIE GHARIB: Texas Instruments was here at the New York Stock Exchange this morning celebrating an important milestone. CEO Thomas Engibous rang the opening bell to mark the 50th anniversary of Texas Instrument's listing on the big board. The semiconductor maker has lots to celebrate. Its stock is up 86 percent since the beginning of the year and earnings more than doubled in the third quarter. When I talked with Engibous earlier today, I asked him about the outlook for the rest of the year.
THOMAS ENGIBOUS, CEO, TEXAS INSTRUMENTS: We guided that our semiconductor business would be up in revenue somewhere between three and 12 percent. So while that's a wide range at this point in time, it does signify that the strength of the market and the DSP particularly driving broadband, driving wireless and driving digital consumer continues to look good.
GHARIB: Mr. Engibous, we have seen strong earnings for pretty much the whole semiconductor industry for the third quarter. Is the chip downturn over?
ENGIBOUS: Yes, we are in a recovery mode. When you look at the growth in electronics, historically it has been driven more by new functionality, not by macroeconomics. And the amount of new functionality that is coming into the market for consumers is probably at the highest level we've seen since the advent of the PC. So I think it's not a quarterly prediction, but if you look out, in a number of years ahead, we should see some growth rates continue, perhaps above historical growth rates.
GHARIB: A big part of your business is providing semiconductors and chips for the cell phones. How much more growth is there, there?
ENGIBOUS: There's still a lot of the world that has not even had the opportunity to make a phone call. But just as importantly, the cell phones that exist today are becoming data terminals. And, you know, you're seeing some of the camera phones come on with GPS and Blue Tube. You're going to see music players, video players. The cell phone is going to be the platform for the mobile Internet. And that is going to really converge a bit with the digital consumer electronics of today. So we perhaps are in the very early stages of what "this portable terminal" will look like a number of years down the road.
GHARIB: We've seen the price of cell phones drop dramatically. How much pricing power do you have?
ENGIBOUS: Well, I don't know if you'd call it pricing power. I mean the fact is, is that the price per processing unit and so forth will continue to come down. But the content of semiconductors per terminal will go up. So our actual dollars per phone have been on a path of increasing. So, for instance, even in a year, last year, when subscriber growth, I believe, was only in the six percent -- or terminal growth was only in the six percent range, our wireless business was up over 40 percent. It's because the content of silicon in a phone is going up quite dramatically.
GHARIB: Give us your thoughts about the outlook for the PC business.
ENGIBOUS: I think the fact is, is that the PC is going to continue to be a very important part of the electronics world. But it is going to grow at a slower rate than it did over the last decade and a half. And we have to recognize that. And the fact that it's so big, it does have a dampening effect on the overall growth rate of the electronics market.
GHARIB: So what products are you excited about for 2004?
ENGIBOUS: I'm excited about the digital consumer electronic devices, the ability to carry your music library in your hand and access a million songs remotely, the ability to play games remotely and watch movies and so forth in the palm of your hand. And I'm excited about what's happening in terms of broadband coming in to people's homes and then being wirelessly distributed around the home. Wi-fi hot spots, those are all areas that I think we're going to see the most growth opportunity in the near term.
GHARIB: We've seen that Texas Instruments' stock has had a very nice move up recently. How much more upside do you think there is?
ENGIBOUS: Our goal is to make sure we deliver the right products to the right customers in the right spaces. And I believe the spaces that we're in right now are the healthy growth areas. So we would expect to continue to grow, just as we have over the last two years, continue to grow at a faster rate than the market overall.
GHARIB: Mr. Engibous, thank you very much.
ENGIBOUS: Thank you, Susie.
