TXN

Texas Instruments Incorporated (TXN)

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Texas Instruments Inc. (TXN)

Q4 2012 Mid-Quarter Financial Update Conference

December 10, 2012 5:00 pm ET

Executives

Ron Slaymaker

Analysts

Patrick Walsh - Crédit Suisse AG, Research Division

Joseph Moore - Morgan Stanley, Research Division

Ross Seymore - Deutsche Bank AG, Research Division

Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

James Covello - Goldman Sachs Group Inc., Research Division

Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division

Shawn R. Webster - Macquarie Research

Christopher Caso - Susquehanna Financial Group, LLLP, Research Division

Romit J. Shah - Nomura Securities Co. Ltd., Research Division

David M. Wong - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Good day, everyone, and welcome to the Texas Instruments' Fourth Quarter 2012 Mid-Quarter Update Call. At this time, I would like to turn the conference over to Ron Slaymaker. Please go ahead, sir.

Ron Slaymaker

Good afternoon. Thank you for joining TI's mid-quarter financial update for the fourth quarter of 2012. In a moment, I will provide a short summary of TI's current expectations for the quarter, updating the revenue and EPS ranges for the company. In general, I will not provide detailed information on revenue trends by segment or end markets, and I will not address details of profit margins. In our earnings release at the end of the quarter, we will provide this information. As usual with our mid-quarter update, we will not be taking follow-up calls this evening. Considering the limited information available at this point in the quarter and in consideration of everyone's time, we will limit this call to 30 minutes. For any of you who missed the release, you can find it on our website at ti.com/ir. This call is broadcast live over the web and can be accessed through TI's website. A replay will be available through the web.

This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the news release published today, as well as TI's most recent SEC filings for a more complete description.

We have narrowed our expected ranges for TI's revenue and earnings from our previous ranges. We now expect TI revenue between $2.89 billion and $3.01 billion, a range that has been narrowed to the middle of our prior range. We expect earnings per share between $0.05 and $0.09 on a GAAP basis. In addition to the $0.06 of acquisition and restructuring charges included in our original guidance for the quarter, EPS also now includes $0.21 of charges associated with the previously announced restructuring in our wireless segment.

As a reminder, we said the wireless restructuring charges would be about $325 million in total, of which about $220 million is for severance and related benefits, and most of the remainder is for noncash impairments related to the Wireless business. Most of these charges will be recognized in the current quarter, although some are subject to the outcome of required negotiations in countries outside the U.S.

If you're having trouble translating the charge amount to the EPS impact in the quarter, please note that goodwill impairment is not tax-deductible. The $0.21 impact that I identified comprehends the tax treatment.

Operator, you can now open the lines for questions. In order to provide as many of you as possible the opportunity to ask a question, please limit yourself to a single question. I will provide you the opportunity to ask a follow-up question. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] And we'll hear first from John Pitzer with Crédit Suisse.

Patrick Walsh - Crédit Suisse AG, Research Division

This is Patrick Walsh calling in for John Pitzer. Just have a quick question on the profitability. On a non-GAAP basis, it looks a little better. Curious, is that all driven by wireless?

Ron Slaymaker

No. Actually, the cost reductions that we're -- the restructuring that we're doing in wireless really won't have any significant impact this quarter as most of the employment reductions are happening late in the quarter. What you're seeing probably translates to about $0.01 better on a, as you call, a non-GAAP basis or however you would get there. And what I would say is that's really just we're continuing to generally tighten down on expenses where possible and that really is just considering the weak environment that we're operating in. So again, just holding a tight rein on expenses. You have a follow-on, Patrick?

Patrick Walsh - Crédit Suisse AG, Research Division

Yes. As a follow-up, do you think that the Wireless business can get to breakeven in the calendar first quarter? And if so, do you expect to be able to stay breakeven as revenue declines going forward?

Ron Slaymaker

Okay. Let me -- the answer to that whole situation is complex. Let me just start with the fourth quarter. I would say that wireless, clearly in the fourth quarter will have an operating loss because it will include the restructuring charge. Going forward, I really don't have a date for you on when that loss will go away as it depends on how fast the revenue declines relative to the cost. I think we said back on our October call that we expect that our baseband revenue in first quarter will be about half of the level that it was in the fourth quarter. So again, considering the baseband revenues declining and then on top of that how fast the OMAP and connectivity declines occur from a revenue standpoint will really drive what will happens from our profitability or loss perspective. Okay, Patrick, thank you for your call.

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