Texas Instruments Disappoints Investors With Outlook

Texas Instruments kept the midpoints of its quarterly profit and revenue forecast unchanged on Monday, disappointing investors who had hoped for an improvement in the chipmaker's outlook.

Shares in the world's biggest maker of chips for mobile phones fell as much as 2% in extended trading but recovered a bit after executives said customer inventory has improved and growth is likely to resume in the second quarter.

The maker of chips for devices from calculators to televisions forecast first-quarter earnings per share of 29 cents to 33 cents from continuing operations, compared with its January target of 28 cents to 34 cents.

After an upbeat quarterly financial report from National Semiconductor last week, investors were looking to the business update from Dallas, Texas-based TI as a possible catalyst for a broad recovery in chip stocks.

"Expecting Strength"

"Given National Semiconductor's outlook last week, I think investors were expecting some strength in TI's wireless business," said Robert Burleson, an analyst with ThinkEquity Partners.

"If you look at the fact that they basically just narrowed the guidance, some of the optimism that fueled TI's shares since last week is waning," Burleson said.

The company also forecast revenue of $3.07 billion to $3.22 billion, compared with the previous $3.01 billion to $3.28 billion.

The midpoints of both earnings and revenue ranges matched those of TI's earlier forecasts as well as Wall Street expectations. Analysts estimated earnings of 31 cents a share on revenue of $3.15 billion, according to Reuters Estimates.

"Our order trends are fully consistent with our view that this correction is winding down and, once again, growth should resume in the second quarter," said Ron Slaymaker, an investor relations executive for TI, on a conference call.

TI competes with the likes of National Semiconductor, wireless chip company Qualcomm , and mixed-signal chip makers Analog Devices and Maxim Integrated Products .

"Best Sentiment Indicator"

Doug Freedman, an analyst with American Technology Research, said there were no surprises -- positive or negative -- in the outlook. "The market's the best sentiment indicator, and the stock is down 60 cents on neutral guidance."

TI also said it expects semiconductor revenue of between $3.01 billion and $3.14 billion, compared with the prior $2.95 billion to $3.20 billion. It backed its earlier target for revenue of $60 million to $80 million for its education unit, which makes calculators.

TI shares fell to as low as $31.88 from its close of $32.59 on the New York Stock Exchange.

The company has posted disappointing results in the last two quarters, citing falling inventories and growth skewed toward low-priced phones. Its shares have risen 14% since January as investors bet on a recovery.