Texas Instruments forecasts revenue below estimates

Reuters News
Posted: Oct 22, 2012 4:39 PM
Texas Instruments forecasts revenue below estimates

By Sinead Carew and Noel Randewich

NEW YORK (Reuters) - Texas Instruments Inc's quarterly revenue fell as demand for its chips slipped on economic concerns, and the company forecast more weakness this quarter in all its customer segments.

The U.S. chipmaker, which supplies companies ranging from computer makers to automakers, said its customers are ordering fewer chips than expected for this time of the year as they are nervous about weak end-market demand.

The company cited a decline in orders for automotive customers in China and Europe and a lot of weakness in the computer industry including peripheral products like printers as well as slowing demand in wireless network equipment.

"Across the board we're seeing customers being extremely cautious, very careful about the level of inventory that they hold so giving us very low levels of visibility as to what they'll want to order for the quarter," Texas Instruments Chief Financial Officer Kevin March said in an interview on Monday.

As a result, the company forecast a fourth quarter revenue range with a midpoint that implies a 13 percent decline from the third quarter, compared with a more typical decline of about 4 percent, March said.

"What's the most disappointing ... here is that this is the point in the cycle where we should be willing to build inventory," RBC analyst Doug Freedman said. He noted that TI came out of a prolonged inventory correction only in the first half of this year.

TI forecast fourth-quarter revenue of $2.83 billion to $3.07 billion, well below Wall Street expectations for $3.24 billion, according to Thomson Reuters I/B/E/S.

However, investors seemed to take the news in their stride after weak reports from smaller chip rivals such as Linear Technology and large chip companies such as Intel Corp and Advanced Micro Devices Inc.

TI's shares fell 0.3 percent in late trade to $27.70 after closing off 2 cents at $27.79 on Nasdaq.


Because of the weaker demand TI told analysts on a conference call that it is slowing down production in its factories and that fourth quarter production will be below the third quarter. However, it declined to give details about how much capacity it is using in its factories.

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The chipmaker's inability to fully utilize its factories has investors worried about its profitability going forward.

"With the macroeconomic slowdown we're experiencing, and TI's excess capacity - they're only using about 75 percent of their capacity right now - they're going to be under some longer-term pressure to try to fill those fabs," said JoAnne Feeney, an analyst at Longbow Research.

TI's third quarter profit rose to $784 million, or 67 cents per share, from $601 million, or 51 cents per share, in the year-ago quarter.

Revenue fell to $3.39 billion from $3.47 billion in the year-ago quarter slightly beat Wall Street expectations for $3.34 billion, according to Thomson Reuters I/B/E/S.

TI forecast fourth-quarter earnings of 23 to 31 cents per share, down from the third quarter.

(Editing by Richard Chang)