Texas Instruments Drops Most in 6 Months as Outlook Disappoints

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Texas Instruments Inc. dropped the most in six months after forecasting sales and profit below analysts’ estimates, citing weakness in communications equipment and personal electronics.

Second-quarter net income will be 60 cents to 70 cents a share on sales of $3.12 billion to $3.38 billion, the Dallas-based company said in a statement on Wednesday. That compared with analysts’ average estimates for profit of 73 cents on revenue of $3.4 billion.

Texas Instruments, the biggest maker of analog chips, forecast weak demand for its components “particularly for wireless infrastructure equipment” and personal computers. The company said it doesn’t expect “a near-term rebound in foreign currency exchange rates.” The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, is up 18 percent over the past 12 months.

The company’s chips enable basic electronic functions in everything from household appliances to spacecraft, making its earnings a reflection of broad demand and sensitive to macroeconomic conditions. Semiconductors typically are priced in dollars, increasing the cost for overseas distributors of maintaining stockpiles of the parts.

“It’s obviously a little bit disappointing. It’s in the areas where we’ve been seeing weakness -- PC and telco equipment -- and that seems to be continuing,” said Steve Smigie, an analyst at Raymond James who rates the shares market perform. “Industrial and auto looks pretty strong.”

Shares of the chipmaker fell 7.7 percent to $54.24 at 10:06 a.m. New York time on Thursday. The stock was up 9.8 percent this year through Wednesday.

First Quarter

Chief Executive Officer Rich Templeton has tried to reduce the company’s dependence on any end-market and has moved away from making the baseband processors used in phones amid competition against Qualcomm Inc. Instead, Texas Instruments is concentrating on analog chips -- semiconductors that convert sound, touch and other inputs into electronic signals -- giving the company a broader reach.

First-quarter net income was $656 million, or 61 cents a share, compared with $487 million, or 44 cents a share, a year earlier. Revenue rose to $3.15 billion from $2.98 billion.

Analysts on average estimated earnings of 62 cents a share and sales of $3.2 billion.

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