Texas Instruments' lowered estimates for second-quarter sales and profit may crimp this year's 32 percent gain in the industry's benchmark index and damp expectations of a rebound in electronics demand, analysts said.
Dallas-based Texas Instruments pared its net income and sales forecasts on Tuesday, blaming the outbreak of SARS in Asia. Lower demand for wireless telephones has compounded already high inventory levels, chief financial offi-cer Bill Aylesworth told investors on a conference call.
The remarks by the world's biggest maker of chips used to power mobile phones mirrors Motorola Inc's comment this week that SARS left it with "significant" stockpiles in Asia. The comments also add weight to concerns that demand for computer products isn't recovering as quickly as some analysts expected, especially in China, the world's largest mobile-phone market by users.
"It's a double whammy, and it could take another quarter to work this problem out," said Quinn Bolton, an analyst at Fahnestock & Co.
"Now that we've had a pretty good run, we're starting to see some cracks in the dam," he said.
Texas Instruments and its rivals have blamed many of their woes on China's manufacturers, which they say made too many handsets and need to sell the excess inventory before buying more chips.
Texas Instruments' sales will increase by about 5 percent in the April to June period compared with the first quarter's US$2.19 billion. Profit will be about US$0.06 a share, the company said in a statement.
Data culled over the past two weeks from clients in China led to the forecast cut, Aylesworth said. Texas Instruments' remarks echoed sentiments this week from Nokia Oyj and Motorola, two of its biggest customers.
Nokia on Tuesday said sales growth this quarter will be at the low end or below earlier estimates. Motorola, the No. 2 mobile-phone maker, on Monday reduced sales and profit forecasts for the year.
The decreased revenue in China translates to US$0.01 of Texas Instruments' reduced net income prediction, Aylesworth said.
The remaining penny is due to higher-than-anticipated costs related to cutting jobs and closing factories, he said.
Phone sales in China, which market researcher Gartner Inc expected to rise to 62 million units this year from last year's 55 million, may now stay below 60 million, Gartner analyst Ann Liang (
Compal Electronics Inc (
It expects to ship 8 million handsets this year, a goal executives at rival handset makers say is overly ambitious.
"I don't think these companies are going to make their expectations," said Lee Kun-yao (李焜耀), chairman of BenQ Corp (明基電通), the nation's biggest mobile-phone maker.
BenQ plans to ship 4 million phones this year, the same as last year.
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