TI sees slower 4th-qtr wireless sales
Wednesday October 18, 7:50 pm Eastern Time
TI sees slower 4th-qtr wireless sales
(UPDATE: Adds analyst comments, after-hours stock price, paragraphs 8-10)
By Marcus Kabel
DALLAS, Oct 18 (Reuters) - Texas Instruments Inc. (NYSE:TXN - news), the world's No. 1 maker of semiconductors for mobile phones, on Wednesday posted a 31 percent rise in third-quarter earnings but forecast flat fourth-quarter sales due to weaker world demand for wireless phones.
The Dallas-based manufacturer of chips used in about two-thirds of the world's digital cellular phones said many of the handset makers it supplies would be working through their inventories in the fourth quarter.
TI's forecast fell into line with recent reports from other wireless suppliers and handset manufacturers that global demand was weakening, news that has prompted selling in shares of major players such as Nokia , Ericsson and Motorola (NYSE:MOT - news).
TI's third quarter earnings matched Wall Street consensus expectations of 33 cents a share, as compiled by First Call/Thomson Financial.
The company posted pro forma net income of $591 million, or a diluted 33 cents a share, versus $453 million, or 26 cents, in the year-earlier quarter.
Pro forma revenues were $3.145 billion, up 25 percent from $2.515 billion in the year-ago quarter. Pro forma numbers are adjusted to reflect the acquisition this year of Burr-Brown Corp.
TI shares closed before the earnings news at $36-7/8, down 8.24 percent after touching a new 52-week low of $35-1/2 as technology stocks took a hammering. The stock was well off a 52-week high of $99-12/16.
But the stock picked up modestly after hours, trading at $37-13/16 on Instinet.
``I think the cell phone issue is a temporary issue...(Handset manufacturers will be able to blow out those inventories by the end of the year,'' said analyst Eric Ross of Thomas Weisel Partners LLC. Ross said he saw no reason to drop his ``buy'' recommendation.
Ross said the expected advent of new high-speed data phones in Europe and the United States next year provided TI with a prospects for continued strong growth in the wireless market.
Texas Instruments said despite the expected drop-off in sales of wireless semiconductors from the third to fourth quarter, those revenues will still be higher than the
fourth quarter of last year.
In addition, it said there would be continued strong growth in the fourth quarter in sales of semiconductors for other high-tech communications devices such as cable modems, Internet audio services and broadband connections.
The result would be overall fourth quarter revenues ``about even'' with the third quarter, TI said in a statement.
Chief Financial Officer Bill Aylesworth said TI believed the dip in wireless demand was temporary.
``Once we're through this, which is mainly in the fourth quarter, we continue to be quite optimistic about wireless in 2001,'' he told analysts on a conference call.
However, he cautioned there was a historical pattern of slower handset sales in the first quarter after holiday buying in the fourth quarter.
Aylesworth said some handset makers had more inventory to work through than others. ``They range from having completed their inventory adjustment to maybe not completing it until next year,'' he said.
Despite the fourth-quarter dip, Aylesworth said TI was sticking by a forecast of world handset sales of between 400 million and 435 million.
Texas Instruments would also stick by plans announced in July to expand capacity for producing semiconductors that go into wireless phones as well as a growing range of digital and Internet communications devices.
``We're convinced it's the right thing to do,'' Aylesworth told Reuters, referring to an increase in spending on capacity expansion to $2.8 billion from $2.5 billion.
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