Bilow Stubborn on DSP sales Rates!
Hi Robert;
In reply to my post #1800, you wrote:
You missed on the 80% was semiconductor.Don't forget that
The Def.Electronics was in the 2Q #s.
in explanation of how I may have miscalculated TI's annualized
growth in DSP revenues. I computed the annualized growth
rate of DSP sales from the most recent two quarter's figures.
When it came to only 11% instead of the 30 to 40% that TI has
been suggesting possible for the coming decade, I suggested
this as an explanation for why the stock was hit so hard after
the third quarter numbers came out.
I've looked at it pretty carefully, and I believe I'm correct in using
the 80% figure, and that TI did not include revenue for the
business sold to Raytheon in the 2nd quarter numbers. First of
all, if TI really did have a 3-month growth in DSP income of 26%
to 49%, as you suggested, we can all be sure that we would
have heard about it. TI is not known for hiding its successes,
and it would make for a great story.
At issue is whether TI's revenue figure for the 2nd quarter,
$2559M, includes revenue of the business it sold to Raytheon.
The 2nd quarter report includes the following:
NOTE: On July 11, the sale of TI's defense business
was closed with Raytheon Company for $2.95 billion in cash.
The net proceeds have been placed in short-term interest-
bearing money market securities and will contribute to interest
income. The net gain of approximately $1.5 billion, after taxes
and transaction costs, will be included in the company's third-
quarter 1997 results. Throughout this report, the defense
operation is reported as a discontinued business.
2Q97 Quarterly Report Edgar
sec.gov
It is my interpretation that TI's revenue only includes revenue
from continuing businesses. Since they breakout income into
continuing and discontinued operations, they have to include
revenue for continuing operations in order to have a financial
statement, and since they never talk about revenues for their
discontinued operations, the revenue numbers they give must
be for continuing operations. This is basic accounting.
The TI 2nd quarter report (and also the third quarter report) is
a little unclear about the issue, but the first quarter report makes
it obvious:
Note: Throughout this report, TI's defense operations are
reported as a discontinued business. As previously reported,
TI expects the acquisition by Raytheon of its defense business
to close in the second quarter of 1997.
Revenues from continuing operations during the
first quarter of 1997 were $2263 million, down 15 percent from
the year-ago period, reflecting lower prices for dynamic random
access memory (DRAM) chips, and the absence of revenues
due to the sale of TI's mobile computing, custom manufacturing
services and printer businesses.
1Q97 Quarterly Report Edgar
sec.gov
To check this, note that the 2Q97 report gives $2559M for 2Q97
revenue, and $4823M for first 6 months 97 revenue. This implies
revenue for the first quarter of $4823M - $2559M = $2264M, which
agrees with what is listed as revenue for continuing operations of
the first quarter (and which explicitly did not include defense).
In other words, TI has only been reporting revenue numbers for
those portions of its business that it expects to keep in the
company throughout 1997. Thus its numbers are comparable
between quarters of this year and following years. You only need
to adjust for defense revenue when comparing quarters before
1997 to quarters after 1996.
In fact, in the 3rd quarter press release, TI gives total revenue
for the first 9 months, and this fits with the 2nd quarter numbers
for the first 6 months. But TI notes that these numbers are not
comparable with the prior year numbers:
Revenues for the first nine months of 1997 were $7322
million, compared with $7481 million in the first nine months
of 1996. Excluding the sold businesses, TI revenues were
up 11 percent versus down 2 percent as reported.
TI Reports Increased Profits for Third Quarter 1997
TI ti.com
Thus it is clear that TI is still reporting only revenues from
contuing operations.
So you will have to look for another error in my calculation. I
look forward to hearing from you.
-- Carl |
