Sept. 21 (Bloomberg) -- Texas Instruments Inc., the world's biggest maker of mobile-phone chips, increased its share buyback plan by $5 billion and raised its dividend for the second time this year to reassure investors after two quarters of declining profit.

The quarterly dividend will rise 25 percent to 10 cents a share, the Dallas-based company said today in a statement. The payout has more than tripled since last year.

Chief Executive Officer Rich Templeton disappointed investors this month, cutting the high end of his sales forecast as unidentified customers ordered less than expected. Nokia Oyj, its largest client, decided last month to spread more chip orders around among new suppliers.

The company's buyback ``tells people that they're not worried about their business,'' American Technology Research's Doug Freedman said in an interview. ``They're still believers in what they're doing.'' The San Francisco-based analyst rates the shares ``buy'' and doesn't own them.

Texas Instruments rose 85 cents, or 2.4 percent, to $36.62 at 4:01 p.m. on the New York Stock Exchange. The shares have gained 27 percent this year.

The company has lost sales of chips for the newest mobile phones to Qualcomm Inc., with market share dropping to 33 percent last year from 42 percent, according to researcher iSuppli Corp. On Sept. 11, the company said third-quarter revenue would be as much as $3.72 billion, compared with an earlier top range of $3.79 billion.

Earnings Boost

Texas Instruments had about $3.8 billion left under its previous buyback plan as of June. The company has reduced its shares outstanding by about 17 percent in almost three years, helping to increase the share of profit each share gets.

With the extra $5 billion, Texas Instruments could buy almost 10 percent of its shares, based on today's closing price.

``This is buoying investor confidence in their earnings ability,'' said Cody Acree, an analyst at Stifel Nicolaus & Co. in Dallas. He rates the shares ``buy.'' ``It shows the maturity of the management team, and it also shows the strength of a business model that's very profitable.''

The company's manufacturing strategy has helped accelerate the pace of share buybacks and dividend increases, Acree said. Texas Instruments shares production with Asian partners and can reduce the amount of work sent to them when orders decrease so its own operations aren't affected.

Nokia's Plans

Nokia said last month it will use Broadcom Corp., Infineon Technologies AG and STMicroelectronics NV to develop advanced- technology handsets and keep Texas Instruments as a ``broad scope supplier.''

``What people want to see or get more confidence on is that TI is going to remain competitive on the wireless side of the business,'' said Steven Smigie, an analyst at Raymond James Financial Inc. in St. Petersburg, Florida.

The buyback is ``not as significant as those issues. It's nice. It helps,'' said the analyst, who rates the shares ``buy.''

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net

Last Updated: September 21, 2007 16:19 EDT