Wed, Jul 25, 2012 - Page 15 News List

Texas Instruments’ profit outperforms expectations

Reuters, NEW YORK

Texas Instruments Inc’s (TI) second-quarter profit beat Wall Street expectations, but the company warned that its third-quarter revenue would be weaker than usual for this time of year as customers are cautious because of global economic uncertainties.

The company said on Monday that orders weakened last month and that its backlog for shipments due in September is also lighter than expected.

CAUTIOUS CUSTOMERS

Company executives said TI’s customers and distributors are “increasingly cautious in placing new orders” because of the global economic environment, even though they have low stockpiles of chips.

Analysts said that the slowdown was not surprising, as TI is the latest in a long line of chip companies, including Intel Corp and Qualcomm Inc, to lower financial targets this quarter.

Because TI’s customers are seeing lethargic demand from consumers and corporations, they are not ordering very far in advance, Williams Financial analyst Cody Acree said.

SHORT DELIVERY TIMES

“End demand is not strong enough that anybody’s afraid of losing out on market share if they don’t carry inventory, so the entire manufacturing food chain is relying on very short delivery times,” Acree said.

TI forecast third-quarter revenue of US$3.21 billion to US$3.47 billion, implying a midpoint that is flat with its second-quarter revenue.

This compares with TI’s 5-year average for third quarter sequential growth of 6 percent.

Chief Financial Officer Kevin March said it was not clear whether customers were anticipating a slowdown in their own business or taking advantage of TI’s ability to deliver chips relatively quickly because it has high inventory levels.

“It’s a little different to draw a concrete conclusion, but what we do know is that it’s unusual,” March said.

“As we look at our customers, our opinion is that their inventories are very lean. That tells us that if in fact we’ve normal seasonal demand, it’s a good thing we’ve built a lot of inventory,” he said.

EARNINGS DOWN

TI reported earnings of US$446 million, or US$0.38 per share, down from US$672 million, or US$0.56 per share, in the year-ago quarter. Excluding certain items, it earned US$0.44 per share, above Wall Street expectations for US$0.41, according to Thomson Reuters I/B/E/S.

Revenue fell to US$3.34 billion from US$3.46 billion, compared with analysts’ average expectation for US$3.35 billion, according to Thomson Reuters I/B/E/S.

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