SAN FRANCISCOFitch Ratings lowered its rating outlook for Texas Instruments Inc. to "negative" from "stable," saying it expects TI's revenue and operating performance for 2009 to deteriorate due to broad-based macroeconomic weakness through at least the rest of the year.
Fitch (New York) said it expects TI's free cash flow for 2009 to be $500 million to $1 billion, down from more than $2 billion, on average, over the past several years.
Fitch said it also believes TI's free cash flow could vary due to extremely weak order uptake in the fourth quarter of 2008resulting in a 0.75 book-to-bill ratioas well as virtually non-existent visibility and the potential for further production-level cuts in order to reduce inventory throughout the semiconductor supply chain.
Fitch said it expects semiconductor industry revenue growth to be flat in 2010. The ratings agency said it believes TI (Dallas) remains positioned to gain modest share in the analog and embedded markets, driven by its greater scale in these areas.
Fitch noted that job cuts announced by TI last year, in conjunction with spending cuts in the company's wireless business, are expected to reduce fixed costs by $700 million per year. Profitability and free cash flow in 2010 likely will improve from expected 2009 levels, Fitch said.
Fitch affirmed TI's issuer default and senior unsecured revolving credit facility ratings of "A+" and affirmed its short-term issuer default rating and commercial paper programs at "F1."
Fitch said TI's free cash flow should also benefit from reduced capital spending. The company plans to spend only about $300 million on capital equipment in 2009, less than half what it spent in each of the preceding two years, Fitch said.