Chip Segment Boosts TI Q3

By Colleen Taylor -- Electronic News, 10/24/2006

Texas Instruments Inc. late Monday reported one of its best quarters yet, thanks in large part to its booming semiconductor business.

The Dallas-based giant reported Q3 revenues of $3.76 billion, up 2 percent compared with Q2 and up 13 percent from the same quarter a year ago. The increases were primarily due to strong demand for the company's high-performance analog and DSP products, TI said.

Furthermore, TI noted that chip sales fueled a growth in profits, as gross profit was $1.93 billion. This was an increase of $25 million from the prior quarter and an increase of $242 million from the year-ago quarter.

TI's chip segment was credited with boosting operating profits, as well. Operating profit was $930 million. This was a decrease of $23 million from the prior quarter, which included a $117 million operating profit benefit associated with a royalty settlement and a sales tax refund. Operating profit increased $169 million from the year-ago quarter, however.

"The third quarter was one of the best in TI's history," Rich Templeton, TI's president and CEO, said in a statement. "Our revenue once again set an all-time record as our share continued to climb in our core markets."

At the same time, orders of $3.43 billion declined, down $478 million from the prior quarter and down $41 million from the year-ago quarter, leading TI to expect that Q4 semiconductor growth will be below the seasonal average. The company said it expects the growth rate of its semiconductor business to be in the upper teens for the year.

Looking ahead, TI said it expects total revenue from continuing operations to be from $3.46 billion to $3.75 billion, with revenues in the semiconductor segment accounting for $3.39 billion to $3.66 billion of the total. 

Wall Street watcher Lehman Brothers is tepid on its outlook for TI, and has lowered its Q4 earnings per share estimate to 43 cents from 44 cents. Lehman's price target remains $39.

"We recognize that weakness at TI and the elevated inventories at key vendors such as TI and Intel may continue to temper broader semiconductor sentiment," Tim Luke, a managing director at the firm, said in a research note this morning.