March 12 (Bloomberg) -- Texas Instruments Inc., the world's biggest maker of semiconductors for mobile phones, said first- quarter sales and profit won't reach its highest previous estimate amid a slump in handset demand.

Sales will be $3.07 billion to $3.22 billion, the Dallas- based company said today in a statement. That compares with an estimate of $3.01 billion to $3.28 billion two months earlier. Profit will be 29 cents to 33 cents a share, excluding some costs, compared with an earlier forecast of 28 cents to 34 cents.

The midpoint of Texas Instruments' new sales forecast is $3.15 billion, trailing the average estimate of $3.2 billion in a survey of analysts by Bloomberg. The move contrasts with reports from Texas Instruments' smaller rivals National Semiconductor Corp. and Analog Devices Inc. They said in recent weeks that customers are increasing orders after an inventory glut.

``That midpoint is a bit below what the Street was expecting,'' Roger Kay, president of consulting firm Endpoint Technologies, said in an interview. ``There may be some issues related to inventories.''

The shares fell 59 cents, or 1.8 percent, to $32 in extended trading after the forecast was released. Shares rose 13 cents to $32.59 at 4 p.m. in New York Stock Exchange composite trading. They have climbed 14 percent since Jan. 22, when the company issued its previous forecast.

`Winding Down'

Texas Instruments said in December it would curb production after seeing lower-than-expected demand. The company closed some factories for the holidays and cut marketing and travel costs.

The company's recent orders suggest that ``this correction is winding down,'' Ron Slaymaker, vice president for investor relations, said today on a conference call with analysts. ``Most of the major product lines are performing close to our expectations.''

Sales should further rebound in the second quarter, Slaymaker said.

Analog Devices Chief Executive Officer Jerald Fishman reported last month that an industrywide ``inventory correction may be abating.'' And National Semiconductor, a maker of chips that extend battery life in mobile phones, said last week that distributors are increasing their orders.

In last year's first quarter, Texas Instruments reported net income of 36 cents a share and sales of $3.33 billion. That included revenue from a sensors and controls division that was sold in April. Excluding some gains, profit was 33 cents.

For this year's first quarter, analysts had estimated profit on average of 32 cents, according to a Bloomberg survey.

The company focuses on chips that use a wireless-phone technology called GSM, or the global system for mobile communications. GSM, which is most prevalent in Europe, is used by AT&T Inc.'s wireless division, the largest U.S. wireless- service company.

To contact the reporter on this story: Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net

Last Updated: March 12, 2007 17:49 EDT