Texas Instruments Gets Trimmed

Shares moved lower Tuesday after the chipmaker narrowed its first-quarter revenue and earnings forecasts

Texas Instruments (TXN) is struggling more than expected to sell its computer chips for use devices like cell phones. Investors bid down the Dallas company's shares on Mar. 13 after news of its latest sales forecast.

Texas Instruments said late March 12 that its total revenue will range between $3.07 billion and $3.22 billion revenue during the quarter ended March 31, compared with the prior range of $3.01 billion to $3.28 billion. Its earnings per share from continuing operations will range between 29 and 33 cents, compared with the previous range of 28 to 34 cents.

Some investors might have been hoping for more improvement. The consensus forecast for the company's earnings per share had been for 31 cents per share on $3.15 billion revenue, according to Thomson Financial.

The U.S. cell phone industry has been maturing in recent years and growing more slowly. Meanwhile Texas Instruments' customers had overbought recently and are still working through their excess inventory. But Texas Instruments has been taking steps to deal with such problems. The company has managed its own inventory in recent months by shipping less than customers expect to consume, for example. Some expect the market to soon correct its problems.

Standard & Poor's equity analyst Clyde Montevirgen expects Texas Instruments to sell more products like computer chips for higher-end cell phone handsets during the second half of the year. "Although we are concerned about internal inventory, we believe that margins should improve from sales mix later in the year and think that TXN will be ready for possible sharp demand increases, given its large market share," Montevirgen said in a research note. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.) Montevirgen reiterated a strong buy opinion on the stock.

Investors sold the company's stock more than 2% to $31.92 per share in early afternoon trading on Mar. 13.