TI shines in 3Q

Texas Instruments (NYSE: TXN) posted third quarter earnings of 51 cents a share, 143 percent increase over last year's quarter, and a healthy 8 cents ahead of to First Call's expectation of 43 cents a share. The company said semiconductor revenue, up 26 percent to $1.92 billion, offset the loss of revenue from its divested memory business.

Shares closed at 84 7/16 Monday, and have been seeing blue sky since the company cruised past estimates in its second quarter. The semiconductor giant and designer of digital signal processing and analog technologies also forecast clear sailing for the next quarter.

Net income for the quarter was $420 million, up from $164 million in the year-ago quarter, due to the absence of losses in the memory business and increased semiconductor profits. Net income increased by $49 million, or 13 percent, from the second quarter of 1999.

Revenue for the third quarter increased to $2.39 billion from $2.11 billion in the year-ago quarter, as growth in semiconductor more than offset the loss of revenue from the memory business.

Earnings of 51 cents a share were up 143 percent from the third quarter of 1998, and up 5 cents a share from the second quarter of 1999, excluding one-time events. TI said 7 cents a share of its earnings this quarter came from investments in DSP-related companies through its venture capital fund.

TI's core semiconductor businesses -- digital signal processor (DSP) and analog -- grew 25 percent and 24 percent, respectively, both due to strong demand for wireless and catalog products. Analog catalog revenue was up 38 percent from a year ago and 19 percent sequentially. The recent acquisitions of Unitrode Corporation and Power Trends, Inc. should extend TI's growth in this area.

Operating margin for the quarter was 19.9 percent, up from 9.6 percent in the year-ago quarter. Operating margin was down 1.4 percentage points from the second quarter of 1999, excluding special charges, primarily due to the catch-up royalties from Hyundai in the second quarter.

Including special charges, net income was $383 million, compared with $155 million; and earnings were 47 cents a share, compared with 19 cents a share. Charges for the quarter included $50 million, primarily for R&D costs associated with TI's acquisition of Integrated Sensor Solutions, Inc. and costs associated with the pooling acquisition of Telogy Networks, Inc. Inc. There was also a charge of $14 million due to the closing of a manufacturing facility in Singapore.

"We again shipped a record number of units into the wireless and mass markets. At the same time, we continued to accelerate new business activities in emerging, fast-growing markets such as ADSL, voice-over-Internet, and cable modem, as illustrated by new products and design wins in the quarter," said Tom Engibous, TI CEO in a company statement. He added he expects "steady semiconductor growth to continue in the fourth quarter." TI will remain focused on high-performance channel products and system-level integration, as it expects the hard disk drive market is expected to continue to weaken with increasing pricing pressure.

Looking toward 2000, TI said it expects strong demand from multiple end-equipment markets for DSP and analog. These include large markets such as wireless and the mass market, and the smaller fast growing markets for ADSL (Asymmetric Digital Subscriber Line), Voice-over-Internet Protocol (VoIP) and cable modem.

TI also said it will take a charge in the fourth quarter due to its purchase of Unitrode, which closed on October 15, 1999, and Power Trends, expected to close by the year's end.