TI to sell part of wireless chip unit

Interested parties?
Analysts on a conference call following the earnings announcement asked TI executives why the company would remain in the custom baseband business given that it expects revenue to decline.

"The reality is that the baseband business—especially the custom baseband business—has very good profitability and is valuable to Texas Instruments," said March.

"We've got a well-run custom business anchored with a great solid relationship," Templeton said. "We are going to continue to operate it and operate it well."

Templeton said TI is in discussions with "several interested parties" over the merchant baseband business but declined to comment further. March said the timing of a deal is undetermined but that a decision would likely be made within the next few months.

Strauss said he was surprised, but not shocked, by the news that TI wants to unload its merchant baseband chip business. He said the move makes sense because TI is hanging on to higher-margin 3G products and unloading products that go into 2G and 2.5G products.

Strauss said a potential buyer would be someone who is serving the Indian and Chinese markets and suggested Taiwanese chipmaker Mediatek could be a possible suitor. Strauss said Qualcomm would not be a possibility because the company is focusing on higher-end markets.

Strauss noted that Freescale Semiconductor recently announced plans to sell its wireless chip unit and said it's possible that a single company may be interested in buying TI's merchant baseband business and some or all of the Freescale unit.

Strauss said a buyer would also have to license TI's DSP technology, an arrangement that TI has been reluctant to enter into in the past. He said he was aware of only one instance when TI licensed its DSP technology to another company, and that that occurred about 10 years ago.

Strauss took TI's willingness to disclose that it was in negotiations about the merchant baseband chip business as a signal that an agreement might be announced soon. "Generally they don't mention such things unless they are close to a deal," he said.

Published reports indicated that the sale of the merchant portion of TI's cellular baseband operation would send about 350 employees to the purchasing company and lead to about 300 layoffs.

TI's analog business posted third quarter revenue of nearly $1.29 billion, flat sequentially and down about 1 percent year-to-year. Embedded processing revenue of about $427 million was down 3 percent sequentially and up 9 percent year-to-year. Wireless revenue of $915 million was up 1 percent sequentially but down 16 percent year-to-year.

TI trimmed its 2008 capital spending forecast to about $800 million from an earlier estimate of $900 million.