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Stock Analyst Update

Weakness Deep in the Heart of Texas Instruments

Chip giant's results point to a continued slowdown.


What Happened?
Texas Instruments (TXN) reported fourth-quarter pro-forma earnings of $0.31 per share Monday evening. These results were below First Call estimates of $0.33 per share. Revenue declined from the previous quarter by 3%, below management's projection in November of flat revenue for the quarter just ended. Sales to the wireless industry declined 7% from the prior-year period as customers accumulated too much inventory. Strong growth from other areas such as broadband communication components (cable and DSL modems) was not enough to offset broader weakness in the firm's other segments. TI's weak business will probably continue throughout the first quarter of 2001, with sales expected to fall by 10% sequentially.

What It Means for Investors
We continue to believe that TI’s long-term investment potential overshadows the current awful industry environment it's facing. However, we do not expect an immediate recovery in TI's business, as it appears that demand worsened at the end of the fourth quarter. Similar to almost every other firm in the chip sector, these weak results mean the near term will continue to be uncertain.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.