U.S. chip maker Texas Instruments lowered the mid-point of its second-quarter revenue target on Monday as sales of calculators missed its expectations, sending its shares down 2.3%.
TI, the biggest maker of chips for mobile phones, said weaker-than-expected demand for calculators and for chips used in wireless network equipment had offset better-than-expected demand for handset chips and high-performance analog chips.
The outlook disappointed investors, who had pushed up TI's stock by more than 4% on Friday due to a strong report from analog chip rival National Semiconductor and on hopes that TI will eventually benefit from a ban on some phones using chips from Qualcomm .
TI adjusted its revenue forecast to a range of $3.36 billion to $3.51 billion, from $3.32 billion to $3.6 billion. This implies a lower midpoint of $3.44 billion, which compared to the average analyst estimate of $3.46 billion, according to Reuters estimates.
Besides the calculator business, American Technology Research analyst Doug Freedman said the forecasts were largely as expected, but some investors had sought a rosier outlook.
"Some investors were expecting strong data points in the handset business, especially at Nokia to show up in TI's guidance," said Freedman. Nokia is TI's biggest client and the world's biggest mobile phone maker.
Calculators Miss Target
TI reduced its estimate for sales from its calculator unit to a range of $160 million to $170 million, from its earlier target of $180 million to $200 million.
The company's head of investor relations, Ron Slaymaker, characterized wireless infrastructure demand as "weak" and said some calculator sales had been delayed.
"Retailers are delaying their back-to-school calculators stocking until closer to the start of school this year. This calculator revenue is expected to shift into the third quarter," Slaymaker said during an analyst conference call.
Because of a "mixed retail environment," retailers were "more cautious with their inventory management" he said.
Slaymaker said the reduction in calculator sales would be "offset primarily by higher semiconductor profitability."
While calculators are TI's most profitable products, they represent a small portion of revenue compared with core units such as wireless chips.
The company forecast earnings per share of 40 cents to 44 cents, compared with its previous forecast for earnings per share of 39 to 45 cents, keeping the mid point unchanged and in-line with the Wall Street estimate of 42 cents, according to Reuters Estimates.
TI narrowed its chip sales forecast to a range of $3.2 billion to $3.34 billion, compared with an earlier target of $3.14 billion to $3.40 billion.
Slaymaker said the U.S. International Trade Commission's decision to ban the import of new high-speed wireless phone models with Qualcomm chips could benefit TI, but he said it was hard to assess how much of a boost it could represent.
Qualcomm and other companies are looking for a stay of the ban, which does not apply to sales of phone models that had already been imported by June 7.
Shares of TI fell to $34.96 in extended trade after closing at $35.79 on the New York Stock Exchange.