Texas Instruments Cuts Sales Forecast as Chip Orders Slow

Texas Instruments Inc. (TXN), the largest maker of analog chips, said third-quarter sales may fall short of earlier forecasts, citing a slump in orders for electronics components from customers across its product lines.

Profit will be 56 cents to 60 cents a share on revenue of $3.23 billion to $3.37 billion, the Dallas-based company said in a statement today. Analysts on average had estimated profit of 60 cents on sales of $3.5 billion, according to Bloomberg data.

Texas Instruments gets most of its revenue from analog chips, semiconductors that are key components in everything from medical devices to e-book readers. The company’s customers and distributors are holding off on orders, concerned that a slowing economy will crimp demand for electronics, said Tore Svanberg, an analyst at Stifel Nicolaus & Co.

“The weakness is fairly broad-based,” said Svanberg, who recommends buying Texas Instruments shares because of the company’s long-term growth prospects. “I don’t think there’s a place to hide right now.”

Texas Instruments stock, down 21 percent this year, fell 1.2 percent to $25.48 in extended trading following the announcement. The shares had earlier lost 9 cents to $25.80 at 4 p.m. today on the New York Stock Exchange.

Chipmakers Cut Forecasts

Texas Instruments is the latest chipmaker to indicate that a weakening economy is weighing on demand. Altera Corp. (ALTR), which makes programmable chips, on Sept. 6 said sales this quarter may fall as much as 3 percent from the prior period. The company had previously predicted an increase of as much as 6 percent.

Texas Instruments’ competitor, Fairchild Semiconductor International Inc. (FCS), also said on Sept. 6 that third-quarter sales and profitability will fall short of its earlier forecasts. In a filing, the company said orders haven’t increased -- as is normal this time of year -- because some Asian customers are reducing their stockpiles of unsold chips.

“Since this downturn is macro-driven, we really have no insight as to how long it will take,” Texas Instruments Vice President Ron Slaymaker said on a conference call. “Orders are weak and we expect, in total, orders will be down from the second quarter.”

On July 25, Texas Instruments said profit in the current period would be 55 cents to 65 cents a share on sales of $3.4 billion to $3.7 billion.

Texas Instruments expects to accumulate inventory as it slows down production to match lower demand, Slaymaker said.

Three of Texas Instruments’ largest customers are Avnet Inc., Arrow Electronics Inc. and WPG Holdings Ltd. -- all distributors of electronic components -- which account for a combined 21 percent of the company’s sales, according to Bloomberg data.

Texas Instruments ranked second behind Santa Clara, California-based Intel Corp. among U.S. chipmakers in total sales last year.

To contact the reporter on this story: Ian King in san Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net