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Texas Instruments 3rd-Qtr Sales Reach Nine-Year High (Update2)

Oct. 18 (Bloomberg) -- Texas Instruments Inc., the world's biggest maker of mobile-phone processors, said profit rose to $563 million as third-quarter sales reached their highest point for the period in nine years.

Net income was 32 cents a share for the three months ending Sept. 30, from $447 million, or 25 cents a share, a year earlier, the Dallas-based company said in a statement. Sales climbed 28 percent to $3.25 billion.

Fourth-quarter profit will be as high as 28 cents a share on sales of as much as $3.2 billion, Texas Instruments said. Chief Executive Rich Templeton is benefiting as mobile-phone makers buy chips to meet demand for phones that surf the Internet, snap photos and play music. Nokia Oyj, the world's biggest handset maker and Texas Instruments' largest client, said global sales of wireless handsets will gain 20 percent this year.

``On the wireless handset side, we're hearing better things,'' said Michael Masdea, an analyst with Credit Suisse First Boston in San Francisco who rates the shares ``outperform'' and said he doesn't own them. ``What's driving Texas Instruments forward is digital communications,'' he said before the results were released.

Wireless products generated 35 percent of first-half sales in Texas Instruments' semiconductor unit, which also makes chips that control household electronics such as televisions.

Shares of Texas Instruments rose 93 cents, or 4.4 percent, to $22.02 in extended trading, after results were released. They had fallen 13 cents to $21.09 by 4 p.m. in New York Stock Exchange composite trading, and declined 28 percent this year.

Forecasts

Texas Instruments expects fourth-quarter profit of 24 cents to 28 cents on sales of $2.96 billion to $3.2 billion. The company was expected to report profit of 26 cents, the average estimate of 32 analysts surveyed by Thomson Financial, and sales of $3.21 billion.

Worldwide mobile-phone sales may rise as high as 630 million handsets this year, from 520 million in 2003, Nokia said last week. Stamford, Connecticut-based researcher Gartner Inc. said last month that number could reach 650 million.

Templeton, 45, is trying to lessen his dependence on Nokia as the Espoo, Finland-based handset maker loses market share to Motorola Inc. and Samsung Electronics Co. Texas Instruments' digital signal processors are the main chips in cell phones and allow handsets to make calls, connect to the Internet and perform other functions.

Texas Instruments cut its sales forecast for the third quarter Sept. 8, explaining that some non-wireless clients were reducing inventories and buying less. Ron Slaymaker, the company's vice president of investor relations, said at the time that revenue from handsets was ``running on plan.''

Legal Victory

Texas Instruments on Oct. 6 won a lawsuit brought by Qualcomm Inc., its nearest competitor in mobile-phone processors, that allows Texas Instruments to continue selling a chip that uses Qualcomm's patents without paying royalties.

The victory may help Templeton extend his company's dominance in one handset standard, the Global System for Mobile communications, or GSM, to standards used in so-called third- generation, or 3G, phones. Qualcomm's patents are a central piece of a new standard known as wideband-code-division multiple access, or W-CDMA. The W-CDMA market may reach $10 billion by 2008, according to researcher IDC.

Templeton won a $51 million investment in July from NTT DoCoMo Inc., the world's second-biggest wireless carrier, to develop processors used in DoCoMo phones. Motorola, the world's second biggest handset maker, said in August it had sold its first handset to DoCoMo and the phone will use a Texas Instruments applications processor, the chip used to run software programs on handsets.

Texas Instruments was expected to report third-quarter profit of 27 cents, the average estimate of 33 analysts in a Thomson Financial survey, and sales of $3.17 billion.

Sales in the third quarter last year were $2.53 billion. Third quarter sales were $3.43 billion in 1995.

Last Updated: October 18, 2004 17:13 EDT

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