Chipmakers National Semiconductor and Texas Instruments Inc (TI) on Thursday issued quarterly financial targets that stoked investors’ worries about a sluggish economy.
Both companies cited weak demand for personal computers and other devices that use microchips. National Semiconductor said consumers were not spending as much as expected.
“We’d all like to believe that consumer spending is onward and upward, but I don’t think it is,” National Semiconductor CEO Donald Macleod said.
National Semiconductor said sales in the current quarter could fall as much as 5 percent from the three months ended in August, as the companies it supplies reduce inventories. While TI stuck with the midpoint of its revenue and earnings outlook range, this was not enough to cheer up investors.
Santa Clara, California-based National Semiconductor’s guidance follows industry giant Intel Corp’s warning last month August that weaker-than-expected consumer demand for personal computers would limit its sales growth.
“You can see what’s happening here between Intel, National Semiconductor and TI’s report: Demand has peaked and is starting to head down,” Charter Equity Research analyst Ed Snyder said.
As US unemployment remains high, investors have been impatient with sluggish economic growth and some fear a possible new downturn.
While TI kept the midpoint in its guidance range for revenue and earnings per share in line with analysts’ expectations, its shares fell 1.4 percent because some investors were disappointed it did not raise its targets.
Ron Slaymaker, TI’s head of investor relations, said that on top of weakening demand for personal computers and related storage products, consumers also appeared to be buying fewer televisions than expected this quarter.
Slaymaker attributed some of the weakness to a lack of consumer interest in TVs boasting 3D technology and the fact that the World Cup soccer tournament had boosted TV sales in the previous quarter.
He said TI was still seeing strong demand from industrial and wireless chip customers in the quarter.
While TI was bullish on smartphones, National Semiconductor said it expected the weak economy to limit sales growth for its chips that handle backlighting and camera flashes on smartphones, Macleod said.
Snyder said that TI’s guidance followed several quarters in which the company said it had trouble keeping up with customer orders because demand was so strong.
“In this environment when you’re not raising guidance and other folks are indicating softness it’s not going to be taken well,” Snyder said.
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