Texas Instruments Reports Higher Profit

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Texas Instruments Inc. (TXN), the No. 1 maker of semiconductors for mobile phones, on Monday posted quarterly sales and earnings that topped its lowered outlook from a month earlier, helped by a late-quarter recovery in wireless sales.

Shares in Texas Instruments rose about 3 percent in after-hours trade following the earnings report.

Texas Instruments, also known as TI, had warned in June that its second-quarter sales and earnings would be lower than expected as a result of disruptions to the cell phone market in Asia from Severe Acute Respiratory Syndrome.

A late-quarter surge in wireless business kept chip sales in that market from a steeper decline, Bill Aylesworth, the company's chief financial officer said.

"It would appear that especially in Asia our customers are working through inventories and it appears the very severe market weakness in Asia in the second quarter caused by SARS is largely abating, at least for now," Aylesworth told Reuters.

But TI said that the market for cellular handsets was still saddled with some excess inventory, an area of some concern for analysts.

"There is still very questionable end-market demand for handsets, but they are executing well on the broadband side and on DSL modems and Wi-Fi products," said analyst Eric Rothdeutsch of Friedman Billings Ramsey and Co.

Broadband, Consumer Electronics Demand Solid

TI's Aylesworth said demand for chips used in broadband telecom products and consumer electronics appeared to be more solid: "There certainly are some cross currents, but as we saw in the second quarter, demand has at least some slow growth potential," he said.

TI forecast current quarter sales in a range of $2.29 billion to $2.49 billion. The $2.39 billion mid-point of that forecast is just below the average of $2.405 billion that analysts surveyed by Reuters Research had expected.

Current quarter earnings per share are expected to be in a range of 19 cents to 23 cents, including a 13 cent per share contribution from the recently reported sale of 24.7 million shares of Micron Technology Inc. (MU), TI said.

Analysts said that cautious outlook appeared to give TI room to surprise on the upside.

"They're being conservative," said David Wu, an analyst with Wedbush Morgan Securities, noting he sees both TI's wireless and non-wireless business improving because its "more adventurous cousins" Cypress Semiconductor Corp. (CY) and Micrel Inc. (MCRL) expect rising third-quarter sales on stronger wireless demand.

TI said it sees third-quarter charges at about $45 million and an additional $100 million in charges by the end of 2004 related to job cuts. The company said it sees quarterly restructuring charges declining through this year and then running at about $10 million in each quarter of 2004, resulting in savings of $105 million a year.

TI posted a second quarter net profit of $121 million, or 7 cents a share, compared with net income of $95 million, or 5 cents a share, a year earlier. The company reported $49 million in second-quarter restructuring charges, mainly for severance, below the $55 million in charges it forecast in June.

Revenues rose to $2.34 billion, slightly above the company's revised outlook, from $2.16 billion a year earlier. Semiconductor revenue rose 3 percent from the prior quarter, while wireless revenue fell 5 percent from the prior quarter.

Last month the rival of Intel Corp. (INTC), Motorola Inc. (MOT) and STMicroelectronics trimmed its earnings per share outlook to about 6 cents from about 8 cents.

After the warning, analysts on average expected earnings of 6 cents a share on revenue of $2.3 billion, according to Reuters Research, a unit of Reuters Group Plc.

Shares in TI rose in after-hours trade to $18.39 from their close at $17.88 on the New York Stock Exchange.