TI revenue drops 8% in Q1

Texas Instruments Inc. (TI) reported revenue of $3.19 billion for Q1 2007, down 8 percent compared to the previous quarter and 4 percent from year-ago level. The company said the revenue was impacted by an inventory correction in the semiconductor market.

Earnings per share (EPS) from continuing operations were 35 cents, a decline of 10 cents from the prior quarter. Also, Q4 included a benefit of 5 cents from the reinstatement of the federal research tax credit and a benefit of 1 cent from catch-up payments associated with new patent license agreements.

"We believe the inventory correction that began in the second half of last year largely ended in the first quarter," said Rich Templeton, TI president and CEO. "Orders are beginning to rebound, and we expect sequential growth to resume in the second quarter."

Gross profit for Q1 was $1.64 billion, or 51.3 percent of revenue, down $111 million from the prior quarter and down $35 million from the year-ago quarter due to lower revenue. Net income was $516 million, or 35 cents per share.

Semiconductor revenue in Q1 was $3.12 billion, also a decrease of 8 percent from the previous quarter due to a broad-based decline in demand. Compared with a year ago, revenue decreased 4 percent primarily due to lower demand for DSP products that more than offset higher demand for analog products.

DSP product revenue of $1.16 billion was down 5 percent from last quarter and down 10 percent from a year ago due to lower demand for a broad range of products. On the other hand, analog product revenue of $1.25 billion was down 5 percent from the prior quarter due to a broad-based decline in demand but up 2 percent compared with the Q1 2006. Revenue from high-performance analog products declined 5 percent from the previous quarter and increased 8 percent from a year ago.

"Analog will continue to play an increasing role in our company. Even though we are the world's leading supplier, our share is low in this large but fragmented market. The opportunity for share gains combined with the attractive financial characteristics of the analog market is appealing. This represents a unique opportunity, especially alongside our strong position in DSP, which provides early entry into important new markets," Templeton said.

"TI's performance in the first quarter was confirmation of fundamental and sustainable long-term changes we have made in the company. Even with an 8 percent decline in sequential revenue, gross margin remained above 50 percent and operating margin remained above 20 percent. TI performed considerably better than in prior troughs because of a more resilient manufacturing strategy and a stronger portfolio of analog products," Templeton added.

For Q2, TI expects total revenue of $3.2 billion to $3.6 billion and EPS of around 39 to 45 cents.