Dec. 8 (Bloomberg) -- Texas Instruments Inc., the second- largest U.S. chipmaker, reduced its profit and sales forecasts as the economic slump cut into demand for electronics. The shares lost as much as 6.9 percent in extended trading.

Fourth-quarter profit will fall to as little as 10 cents a share, compared with a previous estimate of at least 30 cents, Dallas-based Texas Instruments said today in a statement. Sales will be $2.3 billion to $2.5 billion, down from a previous estimate of as much as $3.07 billion.

Texas Instruments is struggling to maintain sales as mobile-phone makers and distributors of so-called analog chips work through stockpiles rather than placing more orders. The company said it’s using less than half of its production capacity, hurting profitability.

“It’s deeper than we were expecting,” Doug Freedman, an analyst at Broadpoint AmTech in San Francisco, said in a Bloomberg Television interview. “We are definitely in an inventory adjustment to support a lower level of demand.”

Texas Instruments dropped 57 cents to $14.25 in extended trading, and fell as low as $13.80. The stock, down 56 percent this year, closed at $14.82 on the New York Stock Exchange.

Analysts predicted fourth-quarter sales of $2.9 billion and profit of 33 cents a share, according to a Bloomberg survey.

“Demand is rapidly drying up,” Ron Slaymaker, a company vice president, said on a conference call. “All major product areas are weaker than we had expected back in October.”

Revenue will also fall “significantly” in the first quarter, although not as steeply as in the fourth quarter, Slaymaker said. The company has frozen hiring and will suspend production later this month.

Altera, National

The forecast followed downbeat reports by other makers of chips for mobile phones and networking equipment. Altera Corp., whose programmable semiconductors power wireless base stations, said today that fourth-quarter revenue will drop as much as 12 percent from the previous three months. National Semiconductor Corp., which supplies chips to the five biggest handset makers, predicted revenue will drop about 30 percent this quarter.

In the fourth quarter of 2007, Texas Instruments reported a profit of $756 million, or 54 cents a share, on sales of $3.56 billion.

Texas Instruments gets more than 15 percent of sales from Nokia Oyj, the world’s largest maker of mobile phones. Last week, Nokia cut its outlook for fourth-quarter sales in the handset industry, saying the slowdown had worsened since the middle of last month.

Texas Instruments, whose total chip sales trail only Intel Corp. among U.S. companies, is also the world’s largest maker of analog chips, which perform basic functions in everything from computers to washing machines to robots. Texas Instruments had relied on sales of analog chips to make up for market share losses to Qualcomm Inc. in mobile-phones.

(For a replay of the conference call, see http://www.ti.com/ir)

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Katie Hoffmann in New York at khoffmann4@bloomberg.net

Last Updated: December 8, 2008 18:18 EST