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TI 3Q meets forecasts
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October 18, 2000: 6:51 p.m. ET
Semiconductor giant meets profit estimates on sales that rose 25%
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NEW YORK (CNNfn) - Texas Instruments Inc. Wednesday unveiled a third-quarter operating profit that matched Wall Street's forecasts, a profit fueled by strong demand for its chips used to power wireless devices and high-speed Internet devices.
The Dallas-based company, whose chips are used in roughly two-thirds of the world's mobile phones, reported net income of $679 million, or 38 cents a share, compared with income of $402 million, or a split-adjusted 23 cents a share, earned in the year-earlier period. Sales rose 26 percent to $3.16 billion from $2.52 billion.
 Excluding acquisition-related charges and investment gains, Texas Instruments said profit from operations was $591 million, or 33 cents a share, compared with $453 million, or 26 cents a share, matching the average estimate of analysts surveyed by First Call / Thomson Financial.
Texas Instruments cautioned that it is anticipating lower revenue from its wireless chips as handset makers work through existing inventories. At the same time, it said that higher sales of other semiconductor types -- those that help power voice communications over the Internet, for instance, would yield overall fourth-quarter revenue "about even" with the third quarter.
"As the build-out of broadband to the home gains momentum, our revenue from digital subscriber line and cable modem markets is rapidly moving toward critical mass," said Tom Engibous, Texas Instruments' chairman and chief executive officer. "Our growth in wireless handsets is now being complemented by growth in an array of communications infrastructure equipment that use our catalog DSP and analog products."
Optimistic outlook
Bill Aylesworth, Texas Instruments' chief financial officer, reiterated that view in a conference call with analysts. "Even with some near-term slowing, this appears to be a market with tremendous growth opportunities," particularly within broadband and wireless connectivity, he said.
 Indeed, the company is anticipating somewhat slower sales of its digital signal processors used in mobile phones and other wireless devices as its main customers rid themselves of excess inventory already sitting on warehouse shelves.
Even so, the company has no intention of slowing spending towards boosting its production capacity, though Aylesworth conceded that the company probably wouldn't reach the revised $2.8 billion spending total it has set aside to revamp its assembly line to produce better and faster chips. The company's spending plans were revised upward from $2.5 billion in July.
"We have aggressive plans and we're executing those plans, a lot of things have to happen right for us to spend the full $2.8 billion," he said. "We'll probably end up a little bit under that rather than over that. Our plan is to continue with that through next year."
Aylesworth also said that Texas Instruments was sticking by its existing forecast for global handset sales this year, which it lowered in September from 435 million to a range between 400 million and 435 million, compared to about 260 million last year.
Sticking to sales forecasts
"The 400-435 million unit range for this year still seems to be relevant for that market," Aylesworth said.
Earlier Wednesday, Lehman Brothers' analyst Dan Niles downgraded Texas Instruments' stock to "neutral" from "outperform," citing concerns about its revenue growth. Niles said in a research note that he is not expecting semiconductor revenue growth to pick up as has been expected.
"As a result, we believe forward EPS estimates at best will remain unchanged and most likely will need to be lowered," Niles wrote. TI is expected to earn 36 cents a share in the December quarter, according to the analyst consensus estimate compiled by First Call.
Niles said that revenue from wireless semiconductors would be "lucky to grow quarter-over-quarter in the fourth quarter, which is normally the strongest quarter, and will definitely decline in Q1." He also noted capacity constraints in catalog analog, and said he expects the issues to persist.
Shares of Texas Instruments (TXN: Research, Estimates) closed Wednesday down $3.31 at $36.88, a fresh 52-week low. The stock has fallen 24 percent this year. Its shares rebounded modestly in after-hours trade, rising to $37.81 on Instinet. 
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Texas Instruments
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