Recently, Texas Instruments ( TXN ),
or "TI," narrowed its revenue and earnings expectations for the
second quarter of 2012. The chipmaker now expects sales of
$3.28-$3.42 billion versus its previous guidance of $3.22-$3.48
billion. The earnings outlook has also been narrowed to 32-36 cents
per share from the previous guidance of 30-38 cents.
Though the chipmaker has narrowed its guidance range, the
midpoint remains unchanged. According to Thomson Reuters, the
analysts also expect sales of $3.35 billion (in line with the
midpoint of the management guidance).
Specifically, management stated that the wireless segment will
decline sequentially. Even in the last quarter, revenue from the
wireless segment was impacted by lower demand in the baseband
business, which the company expects to phase out completely by the
end of the year.
However, TI's Analog and Embedded Processing segments are
expected to post solid sequential growth. Orders and backlog are
also expected to grow sequentially based on strong demand.
TI expects the industrial market to recover faster than expected
and the addition of a solid product line-up from National
Semiconductor, acquired last year, to drive strong overall results
this year. On the whole, management commented that the business is
doing well and results are expected to be as expected.
In the past few quarters, TI had been lowering its guidance due
to soft market conditions and weakness in the handset and
industrial end markets. This is the first time in the past year
that the company has not lowered the midpoint of the guidance. TI
remains confident about the end-market recovery and expects
National Semiconductor to boost its results in the analog-chip
Though the first quarter earnings were down 18.4% sequentially
and 28.6% year over year, management stated that the first quarter
should be regarded as the bottom, with growth expected to return in
the second. The fact that orders of $3.24 billion were up both
sequentially as well as from the year-ago quarter, also point to
growth at TI.
We believe the addition of National Semiconductor strengthens
its product line-up and brings additional capacity onboard.
Additionally, the company's compelling product line-up, the
increased differentiation in its business, restructuring activities
and lower-cost 300mm capacity should drive earnings in the longer
Increasing competition from Maxim Integrated
Products ( MXIM ), Analog Devices ( ADI ),
Broadcom ( BRCM ),
and Intel ( INTC )
remains a concern.
Currently, TI has a Zacks #3 Rank, which translates into a
short-term Hold rating.
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