Texas Instruments Cuts 1,700 Jobs and Winds Down Tablet Chips

Texas Instruments said in September it would halt costly investments in the increasingly competitive smartphone and tablet chip business, leading Wall Street to speculate that part of the company's processor unit, called OMAP, could be sold.

The layoffs are equivalent to nearly 5 percent of the Austin, Texas-based company's global workforce.

"A sale would have been better than a restructuring but a restructuring is certainly better than nothing," Sanford Bernstein analyst Stacy Rasgon said.

TI has been under pressure in mobile processors, where it has lost ground to rival Qualcomm Inc. Leading smartphone makers Apple Inc and Samsung Electronics Co Ltd have been developing their own chips instead of buying them from suppliers like TI.

Instead of competing in phones and tablets, TI wants to sell its OMAP processors in markets that require less investment, like industrial clients like carmakers.

TI is expected to continue selling existing tablet and phone processors for products like Amazon.Com Inc's Kindle tablets for as long as demand remains, but stop developing new chips.

"This year, the Kindle runs on the OMAP 4 and next year's Kindle is slated, we believe, for OMAP 5. We believe that program is well along to completion and do not expect that the termination of OMAP will disrupt those plans," said Longbow Research analyst JoAnne Feeney.

Amazon had reportedly been in talks to buy the mobile part of OMAP.

TI said it expects to take charges of about $325 million related to the job cuts and other cost reduction measures, most of which will be accounted for in the current quarter. Its previously announced financial targets for the fourth quarter do not include these costs, TI said.

The company, which has 35,000 employees around the world, expects annualized savings of about $450 million by the end of 2013 from the action.

TI shares rose to $29 in after-hours trading after closing at $28.76, down 2 percent on Nasdaq.

(Reporting By Sinead Carew in New York and Noel Randewich in San Francisco; editing by Carol Bishopric)

Texas Instruments Forecasts Slowing Earnings

Texas Instruments reported Monday that its quarterly revenue fell 2.3 percent as demand for its chips slipped on economic concerns, and the company forecast more weakness this quarter.

The chip maker has been under pressure from a weak global economy and a wavering personal computer industry and is struggling to fill manufacturing capacity it bought for pennies on the dollar after the global credit crisis.

“Across the board, we’re seeing customers being extremely cautious, very careful about the level of inventory that they hold so giving us very low levels of visibility as to what they’ll want to order for the quarter,” Texas Instruments’ chief financial officer, Kevin March, said in an interview.

Texas Instruments, which makes chips used in products ranging from consumer electronics to industrial equipment, reported a profit of $784 million, or 67 cents a share, up 30.4 percent from $601 million, or 51 cents a share, in the year-ago quarter.

Revenue declined to $3.39 billion from $3.47 billion in the year-earlier quarter.

The company forecast fourth-quarter earnings of 23 cents to 31 cents a share on revenue of $2.83 billion to $3.07 billion.

Analysts on average had been expecting Texas Instruments’ revenue in the current quarter to be $3.24 billion, according to Thomson Reuters.

“It’s definitely light,” said Stacy Rasgon, an analyst at Bernstein Research. “But I don’t know how surprising that is given what we’ve seen in semiconductors and tech recently.”

The company’s inability to fully use its fabrication plants has investors worried about its profitability.

“With the macroeconomic slowdown we’re experiencing, and T.I.’s excess capacity — they’re only using about 75 percent of their capacity right now — they’re going to be under some longer-term pressure to try to fill those fabs,” said JoAnne Feeney, an analyst at Longbow Research.

Texas Instruments Lowers Revenue Expectations

The company said that orders for its semiconductors, which are used in products like cellphones and industrial equipment, started to weaken in June and that orders for shipments due in September were also lighter than expected.

“Although we believe customers and distributors have low inventory levels, the global economic environment is causing both to become increasingly cautious in placing new orders,” the company’s chief executive, Rich Templeton, said in a statement.

Texas Instruments forecast a third-quarter revenue range of $3.21 billion to $3.47 billion, the midpoint of which equals its second-quarter revenue.

This compares with the company’s five-year average for third-quarter sequential growth of 6 percent.

“It’s a little different to draw a concrete conclusion but what we do know is that it’s unusual,” the chief financial officer, Kevin March, told Reuters.

“As we look at our customers, our opinion is that their inventories are very lean. That tells us that if in fact we’ve normal seasonal demand it’s a good thing we’ve built a lot of inventory,” he said.

Texas Instruments reported earnings of $446 million, or 38 cents a share, compared with $672 million, or 56 cents a share, in the year-earlier quarter. Excluding certain items, earnings would have been 44 cents a share compared with Wall Street’s expectations of 41 cents, according to Thomson Reuters.

Revenue fell to $3.34 billion from $3.46 billion a year ago. Analysts’ average expectation was $3.35 billion.