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TI report to document tough times

It's no secret that Texas Instruments, like most semiconductor manufacturers, has had a tough quarter. The question now is how bad the rest of the year will be.

It's no secret that Texas Instruments, like most semiconductor manufacturers, has had a tough quarter. The question now is how bad the rest of the year will be.

TI is expected to report after markets close today first-quarter income of 16 cents a share and revenue of $2.45 billion, according to a report issued today by Merrill Lynch analyst Joe Osha. Merrill Lynch's projection for the company's full-year income is 77 cents a share.

Those numbers are in line with an earnings warning issued last February that projected first-quarter revenue would slip about 20 percent from the fourth quarter, to about $2.4 billion.

The company's problems stem from low demand and high costs. Excess inventories of finished goods, such as cell phones, are crimping sales. At the same time, TI needs to cut costs and may announce the elimination of 2,000 jobs later today, according to published reports.

"Given the speed with which the analog semiconductor business in particular has deteriorated during the first quarter, we think that (a) downside exists to our current figures," Osha wrote in his report.

A company representative said TI had not announced plans for additional cost-cutting measures, such as job cuts. But the representative added that he could not comment on any announcements that will come with today's earnings report, as TI is in a quiet period until then.

Cost-cutting began in February, when TI imposed a number of economic measures, including a voluntary early retirement program. Employees had until April 16 to apply for early retirement under the original deadline. TI said at the time that 2,600 employees were eligible for the program.

Several companies have tried to use retirement programs and attrition to cut jobs without resorting to layoffs.

Whether or not TI makes job cuts, the company faces a tough market for the remainder of the year.

Osha said increases in inventories, a dip in analog chip sales or a decline in gross margins could cause earnings troubles for TI.

But, TI's "intermediate-term problems notwithstanding, the company continues to be our favorite large-cap name in the sector," he said.

Indeed, most industry analysts believe it won't be until the fourth quarter that TI sees any evidence of a jump in sales.

"We don't see the market picking up before September. We think it's going to be a long hot summer," said Will Strauss, analyst with market research firm Forward Concepts. However, "The long-term market is fantastic. Certainly DSP and mixed-signal (chips) are going to outpace the semiconductor market" in growth.