TI Beats its Mid-Quarter Expectations
Online Staff -- EDN, October 18, 2004
Texas Instruments Inc. today reported that Q3 revenues were flat sequentially while up 28 percent year over year, while chip orders were down 5 percent quarter over quarter.
The Dallas-based chipmaker reported revenue of $3.25 billion and earnings per share of 32 cents -- topping its earlier guidance -- as revenue from its wireless and digital light processing (DLP) semiconductor products reached record levels for the second consecutive quarter. Strong sequential growth in these areas offset declines in other areas, primarily in standard products, which were affected by ongoing inventory adjustments, especially in distribution channels, according to TI.
Those same problems affected orders going forward, the company said. Semiconductor orders of $2.62 billion were down 5 percent sequentially primarily because of that demand for standard products, which more than offset the higher demand for wireless and DLP products.
For the current quarter TI expects revenues to down quarter over quarter at $2.96 billion to $3.23 billion, with earnings per share in the range of 24 cents to 28 cents per share.
Breaking Down Q3
During Q3 TI's semiconductor revenue was even sequentially and up 31 percent from a year ago. Sensors and controls revenue declined 5 percent from the prior quarter, which the company attributed to seasonality, but increased 14 percent from the year-ago period
Educational and productivity solutions (E&PS) revenue increased 13 percent sequentially thanks to seasonal back-to-school demand, and 8 percent from the year- ago period primarily because of strong retail demand for new graphing calculators, the company said.
"TI's operating profit in the third quarter more than doubled from a year ago to reach an all-time high," Rich Templeton, TI president and CEO, said in a statement. "The value of TI's diverse product portfolio was evident as weaker revenue from standard products was offset by record revenue from both wireless and DLP products.
In wireless, TI has achieved early leadership in the UMTS market, which is widely expected to be the prevalent global standard for 3G. A strong majority of these 3G cell phones are based on TI digital signal processors. Likewise, in the nascent market for digital televisions, our DLP technology is now outselling plasma in the North American market for big-screen TVs.
Templeton tempered that optimism however.
"Nonetheless, the environment is not without challenges," he stated. "In the third quarter, distributors and customers adjusted semiconductor inventories, and these adjustments have continued into the fourth quarter.
"In response, we have taken quick actions to sharply reduce production loadings, which should enable us to exit the year with lower inventory levels," Templeton continued. "We also tightened expense controls across the board."
TI's overall orders of $3.02 billion decreased 7 percent sequentially primarily because of its chip products, as well as a seasonal decline in E&PS demand, the company said. But compared with the year-ago quarter, TI orders increased 13 percent.
