Texas Instruments Forecast Points to Weak Electronics Demand

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Texas Instruments Inc., the largest maker of analog semiconductors, predicted sales and profit that may fall short of analysts’ estimates on weaker orders from communications and personal-computer equipment makers.

Third-quarter net income will be 62 cents to 72 cents a share on sales of $3.15 billion to $3.41 billion, the Dallas-based company said Wednesday in a statement. That compared with analysts’ average estimates for profit of 75 cents a share on revenue of $3.45 billion, according to data compiled by Bloomberg.

Texas Instruments is the biggest maker of chips that provide basic electronic functions for everything from washing machines to aerospace hardware. The company has thousands of products and customers, making its orders an indicator of confidence across the economy.

The forecast for slower growth is due to the sluggish market for PC and communications components, Texas Instruments Chief Financial Officer Kevin March said in an interview. The company has also seen slowing orders from industrial markets, which could affect longer-term demand, he said.

“Our forecast expects that we’ll probably see a decline year over year, just on a generally softer market as customer expectations about growth in the second half are being revised downward,” March said.

Broader Reach

Chief Executive Officer Rich Templeton has tried to expand the company’s potential markets, moving it away from a specialization in baseband processors for mobile phones. Instead, the production of analog chips -- semiconductors that convert sound, touch and other inputs into electronic signals -- give the company a broader reach.

Analog sales, which provided less than half the company’s revenue in 2010, now make up more than 60 percent. Its other major business is embedded processing, chips that are used to control specific higher functions in equipment such as industrial machinery.

“There’s some weakness in the broader analog markets,” said Tore Svanberg, an analyst at Stifel Nicolaus & Co., who has a hold rating on the stock. “Even in industrial and automotive, the environment is OK, just OK. We’re not seeing any seasonal strength.”

Texas Instruments said second-quarter net income was $696 million, or 65 cents a share, compared with $683 million, or 62 cents a share, a year earlier. Revenue declined 2 percent to $3.23 billion, the company said Wednesday in a statement.

Analysts on average estimated earnings of 65 cents a share and sales of $3.26 billion.

From a demand side, the company saw greater year-over-year sales in North America, a decrease in Europe and Japan, and those elsewhere in Asia were little changed, March said.

Sales were buttressed by growing demand from the automotive industry, as more and more chips are being embedded into vehicles, he said. “Every time we hear that a car got sold we applaud.”

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