TI bests Q4 expectations, plans layoff

: TI bests Q4 expectations, plans layoff
Dylan McGrath
EE Times (01/22/2007 5:29 PM EST)
SAN FRANCISCO — Surprising Wall Street analysts who were expecting a weaker quarter, Texas Instruments Inc. Monday (Jan. 22) reported a net income of $668 million on sales of $3.46 billion for the fourth quarter of 2006. But the company issued a first quarter revenue outlook that fell below analyst expectations and announced plans to eliminate about 500 jobs. The fourth quarter net income of $668 million, which equates to 45 cents per share, was down 5 percent sequentially but up 2 percent year-to-year. Revenue of $3.46 billion was down 8 percent sequentially but up 4 percent year-to-year. Consensus analyst expectations had called for TI to report earnings per share of 38 cents and revenue of $3.43 billion. For fiscal 2006, TI (Dallas) reported a net income of $4.3 billion on record revenue of $14.25 billion. Net income for 2006, which equated to $1.69 per share, surged 82 percent from 2005, while revenue was up 16 percent. "TI delivered important financial achievements in 2006," said Rich Templeton, TI president and CEO. "Specifically, our semiconductor revenue grew more than one and a half times faster than the market, our earnings per share increased almost twice as fast as our revenue, and our return on invested capital expanded to 21.5 percent. Most important to these results was our high-performance analog product line, which grew revenue 33 percent and continued to raise the bar on gross margin for the entire company." Templeton said demand in the fourth quarter was "unseasonably weak," but that the company's profitability remained relatively stable. He credited TI's "hybrid manufacturing strategy," which is based on outsourcing a large percentage of TI's most costly production to semiconductor foundries. Templeton also announced a change in TI's product development strategy. Instead of creating its own core technology, TI will work with foundry partners to specify and drive the next generations of digital process technology, he said. TI will continue making products on these technologies in its own fabs, he added. He said TI would stop production at an older, unspecified fab and move its manufacturing equipment into several of its existing analog fabs. TI expects to save about $200 million through this strategy, Templeton said, and the company will eliminate about 500 jobs by the end of the year. TI's fourth quarter orders were $3.08 billion, the company said, down $352 million sequentially and down $411 year-to-year. The decreases were primarily due to lower demand for DSP and DLP products, the company said. For fiscal 2006, TI's orders were $14.02 billion, up $1.17 billion from 2005, due mostly to demand for analog products, the company said. TI said it invested $1.27 billion in capital expenditures in 2006, primarily for semiconductor test and assembly and advanced fab equipment. For the current quarter, TI said it expects revenue to be in the range of $3.01 billion to $3.28 billion. The company expects semiconductor revenue to be $2.95 billion to $3.2 billion for the first quarter, it said. Consensus analyst expectations had called for TI to report revenue of about $3.3 billion for the current quarter. The company said it would provide a mid-quarter financial update on March 12.