TI forecasts weak Q1 on falling wireless chip sales

Texas Instruments predicted weaker sales and profits in the first quarter than it had expected due to weaker demand for its wireless chipsets. However, the company also forecasted that it will return to growth in the second quarter.

TI said revenue for the quarter will be between $2.99 billion and $3.11 billion, compared with a previous range of $3.02 billion to $3.28 billion. Analysts had estimated $3.16 billion in revenue, according to data compiled by Bloomberg. The company also said earnings per share will be between 15 and 19 cents per share, compared with a previous range of 16 and 24 cents per share.

"The revenue and EPS reductions are due to lower demand for wireless products," Ron Slaymaker, TI's vice president of investor relations, said during a call Thursday with analysts. "Outside of our wireless segment, our revenue is tracking consistent with our initial expectations." Slaymaker said that the company's position in the automotive and network infrastructure segments is still strong despite the weakness in the company's wireless connectivity and OMAP application processor businesses. Last month at the Mobile World Congress trade show in Barcelona, Spain, TI touted a new power-efficient wireless chip for base stations.

However, despite the drop in demand--which TI attributed to customers reducing demand and cutting back on inventories--the company expects to rebound in the near future. "We're planning for sequential growth to resume starting in the second quarter," Slaymaker said. 

Some analysts saw TI's weak forecast as a bad omen for Amazon.com's Kindle Fire tablet, which uses TI's chips. Apple (NASDAQ:AAPL) and Samsung, the two biggest champions of the smartphone market, do not use TI's chips. In-Stat analyst Jim McGregor told FierceWireless he was not surprised by TI's struggles in the first quarter.

"They do a great job with OMAP," he said. "They're better at putting stuff together than almost anybody. But they're facing some very stiff competition." He noted that OEMs looking for solutions that integrate applications processors and baseband modems can easily turn to Qualcomm (NASDAQ:QCOM) or Broadcom. He also said TI's decision several years ago to exit the wireless baseband business could hurt it as more products include LTE and Wi-Fi, given that Intel snapped up Infineon's wireless chip business, Nvidia bought Icera for modems and Broadcom purchased Beceem.

For more:
- see this Dow Jones Newswires article (sub. req.)
- see this Bloomberg article
- see this Reuters article

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