Texas Instruments 4Q rises, but disappoints

Texas Instruments said its revenue rose 14 percent, paced by growth in chips for 3G handsets and basebands, as well as increased communications market share.

Texas Instruments, the world's largest maker of chips for mobile phones, reported its revenue increased 14 per cent on record sales from its semiconductor division, paced by growth in chips for third generation (3G) handsets and basebands, as well as increased communications market share.

The company said its revenue rose to $US3.6 billion in the three months ending December 31, from $US3.2 billion during the same period a year earlier. Its net profit leapt 34 per cent to $US655 million from $US490 million.

But the company's earnings per share failed to meet Wall Street analysts' expectations, causing its stock to tumble. The company earned $US0.40 cents a share in the fourth quarter, a tad lower than expectations for $US0.42 cents a share, according to analysts polled by Thomson First Call.

Texas Instruments' (TI) stock was down 1.8 per cent in after hours trading at $31.12.

The company said its fourth quarter revenue growth was held back by slower sales of graphic calculators, which faced a seasonal decline. But revenue in its semiconductor segment grew to $US3.2 billion, a quarterly record, due to strong demand for the company's digital signal processors and analog chips used in communications and entertainment electronics devices, TI said in a statement.

The company claimed it increased market share in both segments during the fourth quarter.

For the year, TI reached a new record high for revenue, $US13.4 billion, up 6 per cent from $US12.6 billion a year earlier. It's net profit rose by nearly a fourth to $US2.3 billion from $US1.9 billion.

In the first quarter of this year, TI expects its revenue to fall between $US3.1 billion and $US3.3 billion, and earnings per share from continuing operations of around $US0.29 to $US0.33. The company also expects to complete the sale of its sensors and controls operation during the first half of this year.

"TI enters 2006 in excellent health. Customers and channel inventories appear lean, and demand is solid," the company's president and chief executive officer, Rich Templeton, said.

TI said its inventories stood at about 62 days at the end of last year, up from 57 days at the end of the third quarter as it built inventory from lower than desired levels.

By comparison, its inventories stood at 62 days at the end of 2004, the company said.

IT said it would probably spend $US1.3 billion on new plants and equipment this year, roughly even with the more than $US1.3 billion it spent last year. TI also expects to spend $US2.2 billion on research and development.

The chipmaker's board also authorised a new $US5 billion stock repurchase, which is in addition to previous announcements. Last year, the company repurchased $US4.2 billion of its own common stock, reducing shares outstanding by nearly 100 million shares, it said.

The company repurchased just $US753 million of its own common stock in 2004.

Stock repurchases usually benefit shareholders because they reduce the total amount of shares available, increasing the value of each share. They also increase earnings per share statements, which analysts claim is what's partly behind increased profitability at companies in recent years.

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Dan Nystedt

IDG News Service
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