Texas Instruments' In-Line Outlook Boosts Shares
Published on: 10th September 2008
SAN FRANCISCO (Dow Jones) -- With all the uncertainty faced by chip companies and the broader tech sector, Texas Instruments has surprised analysts by affirming its outlook, especially after a market share warning from its top customer, Nokia Corp.
"Given the negative sentiment across the semiconductor sector, and in light of Nokia's recent negative pre-announcement, we expect TI's new guidance to factor positively for the shares," analyst Glen Yeung of Citigroup told clients in a research note.
Shares of TI were up nearly 1% Wednesday after the chip maker narrowed its third-quarter earnings projections.
In its revision after Tuesday's closing bell, TI said it expects third-quarter revenue of $3.33 billion to $3.47 billion, compared with the previous range of $3.26 billion to $3.54 billion.
The company also said it expects a profit of 42 to 46 cents a share, compared with the previous range of 41 to 47 cents. Analysts currently expect TI to report earnings of 44 cents a share on revenue of $3.4 billion, according to a consensus survey by FactSet Research.
The Dallas-based company's update comes shortly after Nokia, the world's largest maker of mobile phones, and a major TI customer, warned that it expects to lose market share in the third quarter, due to heightened competition.
As a result, analyst Cody Acree of Stifel Nicolaus said, "Texas Instruments posted a positive surprise by only narrowing its revenue and earnings range around its prior midpoint. We, and what was likely the majority of the Street, had anticipated Nokia's market share loss to translate to a more cautious TI guidance."
Last month, TI suffered a potential blow after another major customer, Ericsson announced a new joint venture with STMicroelectronics, a rival to TI.
Overall, TI's dominant position in the chip market for mobile phones has been shaken by a shift among its major customers to a multiple-supplier strategy. But the company has said it's decided to focus on its other strengths, including its analog business.
Analyst Krishna Shankar of JMP Securities said in a note to clients that TI appears to be managing the transition to a changing landscape.
"Despite the near-term macro concerns, TI is executing well, in our opinion, and maintaining its leadership position in wireless, embedded, and high-performance analog semiconductors," he wrote.
Acree echoed a similar view, noting that TI looks to be finding some degree of stabilization with wireless and non-wireless inventories, adding that he expects the chip maker's "earnings predictability has improved at least modestly."
(END) Dow Jones Newswires