TI shares drop on Ericsson/STMicro news

Shares of Texas Instruments fell as much as 2% after Ericsson and STMicroelectronics had agreed to combine their wireless chip and software businesses. a Reuters report said.

TI shares were down $0.12 at $24.51 on New York Stock Exchange after falling as low as $24.30 as investors worried that the company, which has been losing market share in the cell phone chip market, would have an even tougher time regaining lost ground after the deal, the report said.

The No. 2 mobile phone chip maker behind Qualcomm, TI has been losing market share to STMicro at Ericsson, which designs chips but has other companies make them, but it had hoped to recoup losses there as soon as 2009.

But the Ericsson/ STMicro tie-up means that this is now unlikely, Charter Equity Research analyst John Dryden, quoted by the Reuters report, said.

'It's a long-term negative for TI,' said Dryden. 'The rebound TI was expecting in late 2009 or early 2010 will not occur.'

The combination of Ericsson, the world's biggest mobile telecom equipment maker, and STMicro, the third-largest maker of wireless chips globally, would supply four of the world's top five cell phone makers, including market leader Nokia, which is TI's biggest customer.