Texas Instruments Reports Lower Profit, Cuts Outlook

Texas Instrumentsreported a profit that fell and missed forecasts by a penny, and the semiconductor maker gave a forecast for the fourth quarter that was lower than analysts' projections.

The company reported a profit of 43 cents a share in the third quarter on sales of $3.39 billion, against earnings of 52 cents a share on sales of $3.663 billion last year.

Looking ahead, Texas Instruments says it expects sales to decline "substantially" in the current quarter.

Looking ahead, fourth quarter, below analysts' consensus forecast of 42 cents a share.

The company's sales outlook of between $2.83 billion and $3.07 billion for the fourth quarter also is lower than expectations of $3.34 billion.

Texas Instruments
L.m. Otero
Texas Instruments

On average, analysts polled by Thomson Reuters forecast profit of 44 cents per share on sales of $3.4 billion.

The company, a leading maker of chips for cell phones and gadgets, has seen weak order trends over the past few months, Chief Executive Rich Templeton said Monday.

Texas Instruments shares declined almost 7 percent in late trading after closing up 1.87 percent at $17.98 Monday.

Shares of Dallas-based Texas Instruments fell 25 percent during the quarter to end at $21.50. Much of the drop occurred the day after a disappointing second-quarter earnings report on July 17. Since the end of the quarter, the stock has followed the rest of the market down.

There have been signs that the fourth quarter would be a bad one for semiconductor companies—last week, competitor Linear Technology warned of a sales drop—but investors still seemed taken aback by TI's warning. Its shares were down $1.06, or 6 percent, at $16.76 in extended trading Monday, after the release of the results.

(Joanne Feeney, FTN Midwest Securities, looks at the results and what Texas Instruments is likely to do in the weeks ahead)

TI said it will reduce its work force by 650 people in six countries from a unit that makes chips for cell phones. And it is in talks to sell part of the unit, which has struggled due to a sales decline at one of its main clients, Motorola.

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The job cuts will come from the division that makes "baseband" chips, which are the ones that beam a phone call to a cell tower. The cuts will save the company $200 million per year, it said.

The unit to be sold is the one that supplies "off-the-shelf" baseband processors to smaller manufacturers. Customers like Nokia Corp., the world's largest maker of cell phones, buys custom chips instead. Of the 650 positions TI is cutting, 350 are in this unit, which means they may be sold off rather than laid off, said Ron Slaymaker, TI's vice president of investor relations.

- Wire services contributed to this report.