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Technology Stocks : Texas Instruments - Good buy now or should we wait? -- Ignore unavailable to you. Want to Upgrade?

To: Patriarch who wrote (4261)	2/7/1999 11:52:00 AM
From: Patriarch	Read Replies (1) \| Respond to of 6180

S&P revises Texas Instruments to stable NEW YORK, Feb 4 - Standard & Poor's today revised its outlook on Texas Instruments Inc. to stable from negative. At the same time, Standard & Poor's affirmed its ratings on the company (see list below). The ratings reflect the company's leadership position in the rapidly growing digital signal processor (DSP) semiconductor segment, its substantial patent royalty stream, and its conservative financial practices. These factors substantially offset soft market conditions for its commodity semiconductors and its long-term exposure to the memory sector through its investments in Micron Technology Inc. The revised outlook recognizes that the company has a sufficiently strong financial profile and financial flexibility to offset its still substantial exposure to the memory industry. Texas Instruments is now focused in the DSP, analog, and logic semiconductor sectors, and also supplies calculators and specialized sensors. The company holds about a 45% share of the $4 billion digital signal processor market. Texas Instruments has particular strengths in wireless DSP applications, although the market is evolving very quickly, and market shares could yet shift dramatically. The company is the largest supplier in the fragmented $20 billion analog chip market. Texas Instruments' other semiconductor operations continue to reflect industry malaise. Importantly, Texas Instruments generates several hundred million dollars annually in pretax royalty income from its extensive portfolio of basic semiconductor process patents. Semiconductor earnings, before interest and taxes margins were 21% for the fourth quarter, which is the first reporting period that excludes the discontinued memory operations. Texas Instruments completed the sale of its memory business to Micron Technology Inc. in September 1998 for 28.9 million Micron shares, $950 million of notes receivable from Micron, and other consideration, offset by Texas Instruments $550 million contribution at closing to help fund the conversion of these factories to Micron's manufacturing processes. Standard & Poor's believes that Texas Instruments retains a considerable memory industry exposure through its Micron investment, although longer term, Texas Instruments' exposure should be reduced as the Micron notes are repaid. Texas Instruments had earlier exited the defense, laptop computer, and contract manufacturing industries and retains its sensor and calculator operations. Fixed-charge coverages near 10 times (x) and return on capital near 20% are strong for the rating category, while operating cash flows are about 120% of the company's $1.3 billion of debt. Cash balances were $2.2 billion at Dec. 31, 1998, supporting Texas Instruments' 'A-1' commercial paper rating. Texas Instruments' net debt level is likely to increase over time, but the company's capitalization is expected to remain conservative. OUTLOOK: STABLE Texas Instruments' reliable royalty income stream, the end-market diversity of its broad semiconductor portfolio, and its strength in digital signal processors are expected to provide a substantial degree of downside protection over the next few years, Standard & Poor' said. OUTSTANDING RATINGS AFFIRMED Rating Texas Instruments Inc. Corporate credit rating A/A-1 Senior unsecured debt A Subordinated debt A- Commercial paper A-1