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Tech Check
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CNBC.com |
] reports its earnings after the bell later today. I've been covering the chip industry since 1989 and I don't recall a downturn this deep, and this broad, and worse, with swollen inventories and a lack of any meaningful visibility, there's no indication when any of this might be turning around.
For Texas Instruments, it's a double-whammy of sorts because of the markets in which it plays: Cell phones and big screen TVs.
And if you look at recent reports and recent trends in the handset market, you understand why this company's challenges are so steep. Nokia [NOK
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] , LG, Sony-Ericsson [SNE
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] , Samsung, even Research in Motion [RIMM
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] and Apple Inc [AAPL
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] . have had less than rosey things to say about the cell phone market in 2009. That doesn't bode well for TI.
Same goes for big screen TVs, when you see Circuit City [CC
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] closing its remaining 547 stores, and you wonder how many consumers, particularly here in California where unemployment sits at just shy of 10 percent, are ready to trade up their sets for a new big screen powered by one of TI's DSP chips.
Against that unnerving backdrop, analysts are looking for 12 cents a share, which is already substantially reduced from TI's earlier forecast, on $2.37 billion. How bad is that? Well, if the company meets expectations, that revenue line is 33 percent below last year's fourth quarter and 30 percent below its third quarter. TI reported 54 cents during last year's fourth quarter.
Yuck.
Broadpoint AmTech's Doug Freedman says in a note to clients that "we underestimated the magnitude of order softness and channel inventory impact on TXN's revenue numbers near term." He adds that "demand side data remains very week, with Auto at the low-end of the spectrum and Communications Infrastructure the space, that may be a matter of time rather than a diamond in the dirt."
What strikes me is that Freedman is reducing its target to $18.50 but still maintains a "buy" on these shares. He says that he believes that an earnings recovery will likely "happen faster than many expect."
And that's the key for investors. Not the company's fourth quarter report, or even what it sees in the first quarter. This is about the turnaround and when TI might see one coming. And that goes for Broadcom [BRCM
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] and Qualcomm [QCOM
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] and Intel [INTC
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] for that matter.
So many of these companies are slashing headcount -- TI may do the same later today -- and so many are jettisoning inventory. The question is whether they're cutting to close to the bone and whether the recovery catches these companies off guard.
That's the optimistic way to look at all this. The reality is, the trouble is, we're unlikely to get any clear vision into what the company anticipates simply because the company itself may not know. We all focus on guidance, but guidance trails away as the quarter progresses.
It's like scuba-diving, blind-folded, in a pool of Jell-O.
These sectors will turn around. Eventually. Parking money in some key sector stars, like Texas Instruments, Intel, Apple, Hewlett-Packard[HPQ
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] , Oracle [ORCL
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] and precious few others when you're talking about tech, awaiting that turnaround may not be the most secure strategy to employ, but it's better than most. Texas Instruments reports right at the close.
Questions? Comments?
Data is a real-time snapshot *Data is delayed at least 15 minutes