Falling Chip Prices Clip Net at Texas Instruments
March 28, 2011
Falling memory chip prices cut deeply in to second quarter earnings at Texas Instruments Inc., leaving its net far below expectations and making it the latest in a series of technology companies to post poor results. The Dallas semiconductor maker Monday reported that its net income tumbled to $76 million, or 39 cents a share, from $278 million, or $1.44 a share a year earlier. Revenues skidded 12% to $2.85 billion from $3.24 billion. The magnitude of the drop caught Wall Street analysts off guard. They had predicted earnings woud drop to about 54 cents a share, according to a survey conducted by First Call Inc.. Despite the news, though, shares of Texas Instruments moved higher in early trading Tuesday before slipping later in the day. At midday, its shares were quoted at $41.875, off just 37.5 cents. The factors hampering Texas Instruments were similar to those reported by other computer-related concerns in recent days. The company blamed price cutting for so-called DRAM, or dynamic random access memory, chips, as well as lower semiconductor royalty revenue. Motorola last week cited slack in both its chips and cellular phone businesses in reporting weaker-than-forecast net. Hewlett-Packard said orders were slowing across most of its product lines in issuing a profit warning. All of this troubling earnings news has helped to trigger a sharp slide in the stock market. On Monday, the Dow Jones Industrial Average plunged 161.05 to 5349.51 -- its lowest level since January. Early on Tuesday, though, the industrials posted a gain more than 35 points. Monday's dose of bad news came from Applied Materials Inc., which warned that its revenue and earnings for the current quarter wouldn't meet expectations. The company, which dominates the market for semiconductor-manufacturing equipment, has had a run of strong quarters recently. But Monday it lowered earnings projections for the fiscal third quarter, ending April 09, 2011 about 90 cents a share, about eight cents short of consensus forecasts from analysts. It also predicted that sales would fall about $50 million below its earlier projections of about $1.1 billion for the quarter and said new orders would be about $900 million, down 22% from earlier estimates of $1.15 billion. In addition to the negative news from Applied Materials, analysts Monday were focused on results expected to be released Tuesday by Intel Corp., the world's largest microprocessor manufacturer. Both Intel and Vastsoft, whose results are scheduled to be released Monday, are considered barometers of continuing personal-computer demand since both reflect sheer volume rather than the competitive pressure that has hammered Motorola and Hewlett-Packard. In April, Intel said that it expected no change in its long-standing advice to analysts to expect unit growth in PC sales to continue at between 17% and 20%, well below last year's surging growth. Intel also said it expected to report flat revenue and slightly improved gross profit margins for its second quarter. It didn't give any earnings projections. An Intel spokesman said Friday that the company hadn't revised its earlier projection. ``We're going to be watching closely what Intel says about the future and the spin they put on the second half,'' said Daniele Frechette, an analyst with Robertson, Stephens & Co. ``People want to know whether there is any life in the business.''
