TI 3Q earnings up 60 pct, sees slowdown in 4Q

AP News
Posted: Oct 25, 2010 9:05 PM
TI 3Q earnings up 60 pct, sees slowdown in 4Q

Chip-maker Texas Instruments Inc. said Monday that third-quarter income soared 60 percent as it continued to satisfy pent-up demand after the recession, but the company expects things to cool down for the rest of the year, as consumer demand is tepid.

The forecast echoes that of other chip-makers including Intel Corp., which are also expecting sales to moderate in the fourth quarter.

TI, whose chips go into everything from cell phones to cars, said it earned $859 million, or 71 cents per share, in the July to September period. That topped the average forecast of analysts polled by Thomson Reuters by 2 cents.

In the same period last year, the Dallas-based company earned $538 million, or 42 cents per share.

Revenue rose 30 percent to $3.74 billion, beating the analyst forecast of $3.69 billion. A year ago, revenue was $2.88 billion.

"Demand from industrial markets was especially strong, while consumer demand cooled, impacting markets such as computing and televisions," said TI CEO Rich Templeton.

TI chips regulate and convert electric power in TVs and PCs and handle other tasks such as communication with hard drives.

Fourth quarter revenue already tends to be lower because manufacturers have already stocked up parts for the holiday season. Templeton also expects weakness this quarter because of "continued soft demand in computing and consumer markets, and slowing growth in the industrial market."

For the fourth quarter, TI forecast net income of 59 cents to 67 cents per share, and revenue of $3.36 billion to $3.64 billion. Analysts had been expecting 63 cents per share in earnings and $3.51 billion in revenue.

TI shares were down 32 cents, or 1.1 percent, to $28.66 in extended trading, after the release of the results. In the regular session, shares closed up 32 cents, or 1.1 percent, at $28.98.

TI went on a shopping spree during the recession, snapping up chip factories from manufacturers that had fallen on hard times. It opened its first factory in China during the quarter, and bought another one in Japan.

On a conference call with analysts, CFO Kevin March said the company now has enough capacity for what it believes will be the next wave of demand, but it might buy more plants if it finds them at rock-bottom prices, like it has recently.

As usual, TI's best sellers were analog chips, which are used in phones and other electronics to regulate power and convert sound into electric pulses. Revenue from that division was up 35 percent from a year ago to $1.581 billion. Sales of embedded processors, used in communications networks, car electronics and many other applications, grew 47 percent to $579 million. TI is winding down what was once an important business of making "baseband" chips for cell phones, which handle communications with cell towers. Its wireless business now focuses on chips that handle functions like GPS navigation, Wi-Fi connections and running programs. That business saw an 11 percent revenue increase, to $767 million.