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Texas Instruments narrows Q1 outlook

Tue, 03/10/2009 - 8:05am
The Associated Press

NEW YORK (AP) – As analysts had expected, chip-maker Texas Instruments Inc. narrowed its outlook for first-quarter earnings and revenue on Monday, slightly raising the midpoint of its sales guidance.

The company now expects to break even on a per-share basis, or post a loss of up to 8 cents per share. That includes restructuring charges of about 4 cents per share, a penny higher than TI's earlier estimate.

Previously, Texas Instruments' first-quarter forecast ranged from a loss of 11 cents per share to a profit of 3 cents per share.

The company also said in its scheduled mid-quarter update that it now expects sales between $1.79 billion and $2.05 billion, compared with a prior range of $1.62 billion to $2.12 billion. This raises the midpoint of the company's outlook by about $50 million.

Analysts, on average, have predicted a quarterly loss of 2 cents per share on sales of $1.86 billion, according to a poll by Thomson Reuters. The estimates generally exclude one-time items.

Texas Instruments makes cell phone chips, as well as analog chips used in digital music players and other gadgets, and embedded chips used in automobiles. As cash-strapped consumers have reduced spending on electronics and cars amid mounting job losses and a worsening recession, chipmakers have been battered in recent months by plunging demand for their chips.

Ron Slaymaker, vice president and head of investor relations, said in a conference call with analysts Monday that demand from China's 3G programs helped boost the midpoint of Texas Instruments' revenue outlook. China is in the process of deploying 3G technology, which is capable of providing Internet access and video to mobile customers.

Slaymaker said orders grew in January and February, but noted that this compared with a very weak December. Overall, Slaymaker maintained that demand continues to deteriorate amid the global recession.

He added that the company is making progress on its plans to cut costs by $700 million a year. In January, TI announced plans to cut 3,400 jobs due to slowing demand amid the economic downturn. That was in addition to 650 previous job cuts.

Slaymaker said TI also has been making good progress on reducing inventory, and overall pricing trends have remained stable.

Analysts had expected the chip maker to tighten its estimates rather than report any great change in trends.

Citigroup analyst Glen Yeung said in a note to investors Saturday that checks in Asia indicate that sales by cell phone suppliers bottomed in January, and February and March have shown improvement. The mid-tier phones that most TI chips go into have not benefited to the same extent, he wrote, but the market for analog chips, another big TI product, has clearly improved, he said.

Shares of Dallas-based TI climbed 16 cents to $14.85 in after-hours trading. The stock had closed the regular session down 2 cents at $14.69.

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