TI posts loss, but makes wireless gains

Texas Instruments posts a net loss of $589 million for the fourth quarter, but sees revenue rise by 20 percent as a result of wireless sales.

Although it lost money in its fourth quarter, Texas Instruments said Wednesday that the wireless market appears to be on the mend.

The Dallas-based company, which designs and manufactures chips for cell phone and other communications customers, reported Wednesday revenue of $2.1 billion for the quarter ended in December--slightly higher than expected. It also reported a net loss of $589 million, or 34 cents a share, including one-time charges.

The loss was largely the result of a $638 million write-down on Micron Technology stock, which TI received when it sold two memory-manufacturing facilities to Micron. Excluding the Micron write-down and other nonrecurring costs associated with layoffs, TI would have earned $100 million, or six cents a share.

Analysts expected the company to report revenue of $2.08 billion and earnings of three cents a share, excluding charges. Still, in October, before TI's lackluster third-quarter results, analysts predicted that the company would report earnings per share of 8 to 11 cents for the fourth quarter.

TI's revenue from wireless chips, meanwhile, grew 57 percent from the same quarter a year ago. Its sales of digital signal processors (DSPs) and analog chips--two key ingredients in cell phones--grew 33 percent and 30 percent, respectively, over the same quarter a year ago. Semiconductor revenue overall grew 22 percent to $1.8 billion in the fourth quarter, compared with the same period last year. Total company revenue grew 20 percent.

The increase in revenue came largely from TI's ability to sell more of the chips required to produce cell phones than in the past. "We are moving from selling only single chips to (selling to) certain customers where we are now selling the entire chipset," said Bill Aylesworth, TI's chief financial officer. Nokia, Palm and many Japanese cell phone makers buy chips from TI. The company also landed a contract to supply chips to Hewlett-Packard for a Jornada handheld in the U.K. To date, HP has largely used Intel chips in its handhelds.

Prices are going up as well. A baseband radio chip for a 2.5G network phone sells for roughly twice as much as the same part for standard cellphones.

The company further added that revenue should be roughly the same in the first quarter, usually a slower period for tech companies, while earnings, excluding charges, should come to six cents a share.

Motorola this week similarly noted that the outlook for wireless continues to look good. Approximately 430 million cell phones are expected to ship in 2003--an increase from 400 million in 2002--the company predicted in a separate conference call. Still, pricing pressures are likely to lessen the impact of the increased number of cell phones shipping.

In other news, TI announced that it is successfully shipping chips manufactured using the 90-nanometer manufacturing process to its customers. The company will begin to commercially ship 90-nanometer chips in the fourth quarter, around the same time as competitors plan to do so.

The shift to a 90-nanometer process should also benefit Sun Microsystems, which has its microprocessors made in TI's factories. Sun will likely begin to market by late 2003 or early 2004 servers with 90-nanometer chips, which will be faster than those made using 130-nanometer processes and will contain more transistors. The dual-core UltraSparc 4 chip will likely be made on this process.

Intel has said it will come out with 90-nanometer chips, which will contain strained silicon and silicon-on-insulator (SOI) technologies (absent in TI's 90-nanometer process) for enhancing performance by the second half of 2003. Meanwhile, Advanced Micro Devices will come out with 90-nanometer chips with SOI commercially in the first part of 2004.