Texas Instruments hit by weak 2Q wireless sales

Tuesday, July 22, 2008

By PETER SVENSSON, AP Technology Writer

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NEW YORK —

Shares of Texas Instruments Inc. took a beating after its second-quarter earnings missed Wall Street estimates.

Weak sales of cell phone chips and a June slowdown in orders from distributors accounted for a 4 percent decline in earnings.

TI shares fell $3.27, or 11.5 percent, to $25.25 in after-hours trading Monday. The shares last traded at that level in 2005.

The Dallas-based chip maker reported net income of $588 million, down from $614 million in the same period a year ago. Earnings per share rose to 44 cents from 42 cents due to share repurchases.

Sales fell 2 percent to $3.35 billion. Analysts polled by Thomson Financial had expected profit of 46 cents per share on sales of $3.39 billion.

The results were at the lower end of the company's own estimates, which ranged from 43 cents to 47 cents per share in earnings and $3.33 billion and $3.46 billion in sales.

TI's sales of cell phone chips have been falling for a while, but investors had taken heart Thursday from a healthy earnings report from Nokia Corp., the division's biggest customer.

"Suffice to say, Nokia is not our only customer and other customers aren't faring quite as well as Nokia has," said Ron Slaymaker, TI's vice president of investor relations.

Motorola Corp., which is trying to separate its handset business, and Sony Ericsson, which reported a 9 percent sales drop last week, are also big TI customers.

Sony Ericsson has been shifting orders away from TI, but apart from that, Slaymaker said, the company is maintaining its share of customer orders.

"What you're seeing is just varying performance levels of our customers in their marketplace," he said.

The company also said overall demand from distributors fell unexpectedly in June as they reduced their inventory levels, partially because of "a weaker economic environment." TI's chairman and CEO, Rich Templeton, also suggested customers had "greater confidence in TI's ability to deliver products within short lead times."

The company's largest division, which makes analog chips, continued to grow. Its output is used in a wide variety of industrial products and consumer gadgets such as digital cameras and music players.

The other thriving division makes chips that are "embedded" into cars and other industrial products.

TI said it expects third-quarter earnings of 41 cents per share to 47 cents per share on sales of $3.26 billion to $3.54 billion, below the Thomson Financial estimates of 51 cents per share and $3.56 billion, respectively.