Another TXN point of view (H&Q's Chaplinsky):
"..We are trimming our December quarter EPS estimate... on TXN to $0.60 from our earlier projection of $0.65, which would put Q4 flat with Q3. Our new estimate primarily reflects larger than expected losses from DRAM chip sales combined with soft mixed signal chip sales in the mass storage markets. We now estimate that TXN will lose approximately $0.11 EPS ($44 million) in the December quarter from DRAM chip sales, worse than our earlier estimate of a loss of $0.07 EPS, as average selling prices (ASPs) continue to fall from the September quarter.
We also believe that mixed signal chip sales into the mass storage markets will be down slightly from the prior quarter as the industry continues to work through an inventory correction. TXN's total chip sales into the mass storage market runs at approximately $250 million per quarter, with high exposure at the 3GB and greater drive densities, in which there is currently an industry wide excess of supply.
Although the company has indicated that it has yet to experience any softness from DSP chipset demand from 3Com, we believe that TXN has adverse exposure to this market as 3Com begins to work down its channel inventory of x2 modems. Currently, we believe 3Com's modem chipset sales represents approximately 5% of TXN's total revenue. (*which it apparently lost since this report*)
While weak DRAM pricing, seasonally lower calculator sales, soft mixed signal chip sales into the mass storage market, and potentially weak DSP chip sales into the PC modem market are all expected to put pressure on Q4 results, we believe that strong DSP chip sales into the wireless communications segment will provide some relief and produce sequentially flat Q4 results.
We are trimming our 1998 and 1999 EPS projections... as we expect a recovery in DRAM pricing will be longer than anticipated (perhaps as late as 2H'98) and the x2 modem adoption rate will be slowed as
confusion surrounding the 56K standard is not expected to be resolved until Q3'98. Our new 1998 and 1999 EPS estimates are $2.90 and $3.70, down from our earlier projections of $3.00 and $3.80 respectively..." |
