MOUNTAIN VIEW, Calif.--Texas Instruments Inc. (TI) reported a decline in both revenue and earnings for the third quarter on Monday (Oct. 24), while lowering its forecasts for sales in the fourth quarter due to uncertain macro-economic circumstances and the global downturn. Following the results, TI saw its shares drop 1.2 percent to $31.32 in after-hours trading.
TI, which makes chips for products ranging from mobile phones to washing machines and calculators, said its revenue for the quarter fell 7.3 percent to $3.47 billion, short of analyst estimates. The company reported net income of $601 million and earnings per share (EPS) of 51 cents, down from $859 million and 71 cents per share in the same quarter last year.
Some of the losses can be attributed to the absorption of analog chip maker National Semiconductor Corp., which was recently acquired by TI. That transaction officially closed Sept. 23 and TI’s EPS apparently includes 9 cents in charges associated with the acquisition.
TI said its total orders were down 10 percent year-over-year and had slipped 15 percent since the second quarter, however, Chief Financial Officer Kevin March said revenue had picked up slightly as the third quarter progressed.
Despite March’s comments that the decline seemed to be coming towards an end, TI still slashed its forecast for the fourth quarter, predicting EPS of between 28-36 cents, including 15 cents per share in acquisition related costs, with fourth quarter revenue between $3.26 billion to $3.54 billion, or a midpoint average of 2 percent lower than the third quarter.
TI is the largest analog semiconductor firm and analog chips—used to convert real world signals into digital ones and manage internal device power—make up about half TI’s revenue. In the third quarter, however, even sales of analog chips managed to drop 1.5 percent, as total earnings fell 20 percent.
Meanwhile, TI’s embedded processing segment slipped 7 percent with earnings down 29 percent while a decrease in demand for connectivity chips brought down TI’s wireless sales by 24 percent.
With key mobile customers like Finnish phone-maker Nokia Corp. and Canadian BlackBerry maker Research in Motion losing market share rapidly of late, the knock-on effect has clearly hurt TI. The firm, however, hopes that recent momentum for its Omap 4 processor—chosen by Google as a test-bed for Android 4.0, Ice Cream Sandwich—and design wins like the Amazon.com Inc. Kindle Fire tablet will help it to recover somewhat in coming quarters.
On TI’s earnings call, Ron Slaymaker, vice president and head of investor relations, said he felt “pretty confident” with TI’s position in the mobile processing world, adding that his firm had already proven to partners that it could be relied on to do a good job.
He added that the previous version of Android (Android 3.0, Honeycomb), which had been based on Nvidia’s Tegra 2 processor, had been “a bit of an anomaly” having been rushed out in time for the Consumer Electronics Show in Las Vegas before devices were completely ready. Slaymaker assured those on the earnings call this would not be the case with Android 4.0, saying TI had worked with Google on it for a significant amount of time already.
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