Texas Instruments first quarter earnings fall 12%

  • Business
  • Tuesday, 24 Apr 2007

DALLAS (AP) - Chip maker Texas Instruments Inc. reported a 12 percent drop in first-quarter earnings Monday but said it had recovered from an inventory glut and predicted solid growth in the coming months. 

The earnings beat Wall Street expectations and the Dallas-based company's shares surged in after-hours activity on a rosier second-quarter forecast. 

Texas Instruments said it earned $516 million (euro380.62 million), or 35 cents per share, in the most recent quarter, compared with $585 million, or 36 cents per share a year earlier. 

Revenue fell to $3.19 billion (euro2.35 billion) from $3.33 billion a year ago. 

Analysts were expecting 31 cents per share profit on sales of $3.15 billion (euro2.32 billion) for the January-March quarter, according to a survey by Thomson Financial. 

Rich Templeton, TI president and chief executive, said the excess inventory that has plagued the company for the past few quarters was easing. 

TI predicted second quarter revenue would range from $3.32 billion (euro2.45 billion) to $3.60 billion (euro2.66 billion) on earnings of 39 to 45 cents per share.  

It will release a mid-quarter update on June 11. 

Ron Slaymaker, the company's vice president of investor relations, said the problems of the past several quarters were ending because of lower inventory levels among its customers, which includes handset maker Motorola Inc., and rebounding demand for chips in a variety of new electronic gadgets. 

"We think the issue that has been a drag for us on our earnings is now behind us,'' Slaymaker said. 

Templeton added that all things considered, his company "performed considerably better than in prior troughs because of a more resilient manufacturing strategy and a stronger portfolio of analog products.'' 

Analyst David Wu at Global Crown Capital said it's common knowledge that the semiconductor industry is emerging from a period of excess inventory. 

"The surprise is how profitable the company is,'' he said. 

"I think it's a much more profitable company than it used to be.'' 

In the fourth quarter, TI executives said earnings had been affected by a shift in the wireless market, in which growth is faster for lower-end phones with less-expensive chips. 

But Slaymaker said that trend was again shifting and demand was rising from customers who want chips in higher-end handsets. 

Slaymaker said the company's previously announced plans to stop production at a chip fabrication plant in Dallas were still on track to happen by the end of the year as part of a streamlining move announced in January to cut costs. 

"They have executed their way through this downturn,'' said Cody Acree, an analyst with Stifel Nicolaus & Company Inc., who recently upgraded TI's stock to a buy rating.  

"The only thing that matters is, are they better then people expected, and they definitely are.'' 

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