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Weak demand slumps TI, Wall Street disappointed

Posted: 25 Oct 2012 ?? ?Print Version ?Bookmark and Share

Keywords:weak end-product demand? sluggish economy? OMAP applications processor?

With its company executives citing a sluggish economy and weak end-product demand, Texas Instruments Inc.' third quarter sales report and fourth quarter revenue target both disappointed Wall Street recently.

Despite TI's third quarter sales coming in at the upper half of the company's targeted range, the result still fell below analysts' expectations. The company forecast a sequential sales decline of around 13 per cent for the fourth quarter.

"We expected revenue and demand to be weak, and they were," said Ron Slaymaker, TI's vice president of investor relations. "Similarly, our expectation is that this market weakness will carry forward into the fourth quarter as customers respond to the sluggish macro environment and to poor demand for their products."

TI is the latest in a string of chip companies to blame weaker than expected sales on a difficult macroeconomic environment and weak end demand. Rivals including Intel Corp., Advanced Micro Devices Inc. and Marvell Technology Group Ltd. have all reported sales below their initial quarterly targets as consumer demand for PCs and other products has declined in recent months amid a difficult economy.

"Our market has weakened, and we expect it will remain so in the fourth quarter as the overall world economy continues to be soft," said Kevin Marche, TI's chief financial officer.

Below expectations
TI reported third quarter sales of $3.39 billion, up 2 per cent from the previous quarter and down 2 per cent from the third quarter of 2011. The company reported a net income of $784 million, or 67 cents per share, up 76 per cent from the previous quarter and up 30 per cent from the year-ago quarter.

For the fourth quarter, TI projected that sales would slip to between $2.83 billion and $3.07 billion, which would represent a 13 per cent decline at the midpoint. TI's fourth quarter sales target was well below consensus analysts' expectations of more than $3.2 billion.

TI, which still makes calculators, said its calculator revenue is expected to decline about $100 million in the fourth quarter. The company said it received about $60 million in insurance payments in the third quarter for business lost following last year's earthquake in Japan, which will not carry over into the fourth quarter.

TI executive declined to discuss plans for the company's OMAP applications processor, which the company has said will be re-targeted towards embedded applications, rather than smartphones and tablets. Subsequent reports have indicated that the company is in discussions to sell part or all of OMAP to Amazon.

"We realise there are questions regarding our plans for OMAP and connectivity products sold into the smartphone and tablets spaces," Marche said. "I can tell you, we are actively working on these plans, but at this point in time, we don't have anything new to share with you."

TI said its revenue from analogue productswhich represented 70 per cent of its sales for the quartertotalled $1.84 billion, up 2 per cent from the previous quarter and up 18 per cent from the third quarter of 2011.

- Dylan McGrath
??EE Times

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