Texas Instruments Falls Most in Four Months After Missing Sales Estimates

Texas Instruments Inc. (TXN) dropped the most in almost four months in New York trading after the company’s fourth-quarter sales forecast fell short of analysts’ estimates amid weaker demand for electronics components.

Revenue will be $3.19 billion to $3.33 billion, the Dallas- based company said in a statement yesterday. On average, analysts had estimated sales of $3.41 billion, according to data compiled by Bloomberg.

Texas Instruments, the second-largest U.S. chipmaker, gets most of its revenue from analog chips, semiconductors that are key components in everything from missiles to washing machines, making its earnings a broad indicator of demand across the economy. Sales are being hurt by slowing purchases of electronics and falling orders from telecommunications-equipment makers.

“There’s no confidence out there,” said Tore Svanberg, a San Francisco-based analyst at Stifel Nicolaus & Co. He recommends buying Texas Instruments stock, which he owns himself. “Distributors are still very cautious and are still drawing down inventory.”

In October, Texas Instruments predicted fourth-quarter revenue would be $3.26 billion to $3.54 billion. This is the first quarter that Texas Instruments is including its National Semiconductor Corp. acquisition in the forecasts. That transaction closed on Sept. 23.

Inventory Reduction

Texas Instruments fell 3 percent to $29.01 at 9:46 a.m. in New York, after earlier posting the biggest intraday percentage loss since August. The shares were down 7.9 percent this year before today.

“The weakness is pretty much broad-based, with the exception of wireless,” Texas Instruments Vice President Ron Slaymaker said on a conference call with analysts. “Orders will likely decline some from the third quarter.”

Texas Instruments is shipping fewer chips than its customers are using, evidence of a reduction of inventory by its distributors, Slaymaker said. By region, Europe is the weakest, followed by Asia and then the U.S., he said. Only Japan will grow this quarter as it continues to rebound from the effects of the March earthquake and tsunami.

The European sovereign debt crisis and budget struggles in the U.S. are helping suppress consumer spending. The Bloomberg Consumer Comfort Index was at minus 50.3 in the period ended Dec. 4, after a reading of minus 50.2 the prior week. The gauge has been at minus 50 or worse for 11 of the past 12 weeks, an unprecedented stretch of pessimism in its 26-year history.

Applications Chips

Texas Instruments’ OMAP applications processor is the main chip in Amazon.com Inc.’s new Kindle Fire tablet and smartphones made by Motorola Mobility Holdings Inc. and other handset manufacturers. OMAP, or Open Multimedia Application Platform, chips are estimated to represent about 7 percent of the company’s revenue, according to Chris Danely, an analyst at JPMorgan Chase & Co.

Profit in the fourth quarter, including costs related to the acquisition of National Semiconductor, will be 21 cents to 25 cents a share, the company said yesterday. In October, Texas Instruments forecast earnings of 28 cents to 36 cents.

Three of Texas Instruments’ largest customers are Avnet Inc. (AVT), Arrow Electronics Inc. and WPG Holdings Ltd. (3702) -- all distributors of electronic components -- which account for a combined 23 percent of the company’s sales, according to Bloomberg data.

Texas Instruments ranked second behind Santa Clara, California-based Intel Corp. (INTC) 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

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