Texas Instruments Q2 profits dip by 90%

Marcus Kabel

DALLAS: Texas Instruments Inc., the world's No 1 maker of computer chips for

mobile phones, on Monday said its second-quarter earnings, excluding one-time

items, fell 90 per cent as customer demand remained low after plunging earlier

this year.

TI also warned it expected a pro forma loss in the third quarter of "a

few cents" per share and that third-quarter revenue would decline 10 per

cent to 15 per cent from the second quarter. The current consensus analyst

forecast for the third quarter is a profit of 4 cents, according to Thomson

Financial/First Call.

"Make no mistake, this is a severe downturn, but we now see some signs

of stabilization," said Tom Engibous, chairman, president and CEO. TI hit a

sharp fall-off this year in what had been a booming market for chips for cell

phones and other digital communication devices, such as high-speed modems, DVD

players and digital cameras.

The Dallas-based manufacturer of the chips used in about two-thirds of the

world's digital cellular phones said semiconductor customers continue to reduce

inventories in an environment of weak demand for their own products.

The company said that on a pro forma basis, second-quarter income was $50

million, or 3 cents a share, compared with $543 million, or 30 cents a share, in

the year-earlier quarter. The consensus analyst profit forecast was 2 cents per

share, with a range between zero and 5 cents, according to Thomson

Financial/First Call. Revenues were down 31 percent to $2.04 billion from $2.93

billion a year earlier.

Engibous said hopeful signs included a slower decline in semiconductor orders

than in the first quarter and an increase in orders in semiconductors for

wireless phones. Semiconductors account for about 80 per cent of TI's sales and

wireless chips make up about 20 percent of total semiconductor revenues.

Analysts said the results were largely in line with expectations after TI

warned in April that it expected a drop of around 20 percent in revenues from

the first quarter, when it posted a 17 percent drop from the last quarter of

2000.

"More people will be lowering their third-quarter forecasts to a loss,

and that will probably put some pressure on the share, although not that

much," said Chris Chaney, semiconductor analyst at AG Edwards. Chaney said

he has been forecasting a loss of 4 cents in the third quarter since April.

TI chief financial officer Bill Aylesworth said it was too early to make

predictions for the fourth quarter. "We can't really say beyond the third

quarter," Aylesworth told Reuters. "We'll have earnings (per share) of

21 cents in the first half, a loss of a few cents in the third quarter and some

signs of stabilization and the feeling that we're nearing the bottom," he

said, referring to pro forma earnings.

Pro forma numbers are adjusted to reflect a number of one-time charges and

gains, including $214 million in severance costs and $35 million for closing

three semiconductor plants in New Hampshire and California. TI announced in

April it was laying off 2,500 people, about 6 percent of its global work force,

for total layoffs this year of about 4,500.

Including those one-time charges and costs, TI said it recorded a net loss of

$197 million, or 11 cents per diluted share, compared to a net profit of $1.296

billion, or 72 cents a share, a year earlier.

(C) Reuters Limited 2001.