AP News, October 23rd, 2007
Shares of Texas Instruments Inc. tumbled more than 8 percent Tuesday, a day after the chip maker announced positive earnings results that were overshadowed by a bleaker earnings forecast for the upcoming quarter.
Shares of Texas Instruments fell $2.84, or 8.29 percent, to $31.43 in trading Tuesday. Shares had gained 35 cents to close at $34.27 Monday, before the company released its report. The stock has ranged from $28.24 to $39.63 in the past year.
The chip maker said Monday net income rose 11 percent to $776 million, or 54 cents per share, in the quarter ended Sept. 30.
That included a 2 cent-per-share gain from the previously announced sale of a business unit, and was enough to beat Wall Street estimates of 50 cents per share, according to Thomson Financial.
But Texas Instruments also said its fourth quarter would be lower than analysts' projections due to seasonal and market factors.
The Dallas-based company now expects fourth-quarter profit of 48 cents to 54 cents per share, on revenue of $3.40 billion to $3.68 billion. Analysts had predicted Texas Instruments would make 50 cents a share on revenue of $3.72 billion.
Company officials cited a seasonal slowdown in wireless products used by handset makers such as Motorola Inc. and Sony Ericsson for the shortfall.
Sony Ericsson recently announced it will buy chips from other suppliers as well as Texas Instruments.
"While Texas Instruments will continue to win and lose designs competitively going forward, the momentum of these designs for market share gains has ebbed," Jefferies & Co. analyst John Lau wrote in a research note.
Lau lowered his share-price target to $37 from $43 and was one of several analysts to downgrade TI's stock.
Citigroup analyst Glen Yeung warned revenue growth estimates for the semiconductor industry may still be too high and could be further reduced.
"While this (market) share loss had been previously announced, it is just now having a noticeable impact," Yeung wrote. "Given that the benefit of a re-engagement at Sony Ericsson and share gain at Motorola do not materialize until mid-2008, we model subseasonal revenue growth in (the first quarter) for Texas Instruments."
Texas Instruments, which makes chips used in more than half the world's cell phones, said it is seeing strong growth in the market for analog chips used in a variety of electronic devices, including cell phones and digital music players.
The company's education division, which accounts for a fraction of overall operations, grew by $35 million from the previous quarter to $202 million because of the back-to-school shopping season.
Cody Acree, an analyst with Stifel, Nicolaus & Co., gave TI a mixed review, saying that while the company was in line for the quarter, its outlook was cautious. Unlike others, he maintained a "buy" rating and a $44 share-price target.
In a research note, he recommended investors "who may have felt as though they had missed the improving trends of the chip industry use any weakness surrounding earnings season as an opportunity to build positions in TXN, which we believe to be among the best positioned and best managed companies in the industry."
Texas Instruments is in the process of cutting 424 jobs at its Dallas facilities.
On Monday, the company said it was cutting about 300 manufacturing jobs from its facility in Tucson, Ariz. About 200 of the manufacturing jobs will be added to the company's facility in Sherman, about 65 miles north of the company's headquarters.
The transition will take two years and result in a restructuring charge of about $35 million, with the company expecting to save $20 million.
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