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TI catches DSP wave

Texas Instruments CEO Tom Engibous says the company will move into the digital age of electronics with a continued focus on DSPs.

    San Francisco--As part of a continued effort to reinvent his company, Texas Instruments' (TXN) CEO today stressed the importance of digital-signal processing (DSP) and its upside potential to analysts and investors here at an analyst conference.

    Tom Engibous, Texas Instruments' Lawrence A. Weinbach CEO and president, introduced the company as "a new company?a high-tech start-up," to a standing-room-only group at a Montgomery Securities' investment conference.

    He outlined how his company will shed its image as just a semiconductor manufacturer and memory company and move into the digital age of electronics with a continued focus on DSP while simultaneously shedding non-core businesses.

    "DSP is the single biggest opportunity for us since the integrated circuit was introduced 39 years ago," Engibous said.

    Just last week the company introduced a $100 million venture fund dedicated to accelerating development efforts linked with digital signal processing. TI said it will target investments at companies developing the next wave of DSP applications and markets, particularly start-up companies seeking initial funding.

    "If you want to compete in this market, you have to focus on it," said Engibous, noting that it is important to fuel the development and tap the market of new companies in order to ensure a top slot in growth.

    In its most recent quarterly report, TI reported that DSP revenue generated over 40 percent of its semiconductor revenue. Revenues reached $2.6 billion, up 7 percent from a year earlier, a figure largely driven by a 17 percent increase in DSP-fueled semiconductor sales.

    And analysts agree that the company is propelling itself forward. In a report released for the conference, analyst Jonathan Joseph said the company reported a 72 percent year-to-year gain in semiconductor orders during the June quarter. "Orders have remained strong this quarter," Joseph said. "The strong orders are an indication that business for Texas Instruments continues to accelerate."

    DSP is a powerful processor that handles signals in real time, making it extremely useful for gadgets that won't tolerate delays, such as cellular phones, modems, disk drives, or satellite broadcasts.

    Engibous noted that the best of DSP is yet to come and that is what makes its potential so great. The CEO sees growth opportunities in the health care field and the safety-systems field, for example.

    The company projected that the market for DSP will balloon to a $50 billion market by 2007. That follows 40 percent yearly growth since 1988. Jones estimated that TI took 45 percent of the $3.3 billion DSP market this year.

    So even as the company moves away from non-core business, the upside swing in DSP likely will more than offset lost revenues elsewhere, which is what happened in the June quarter.

    In the past year, during its transition, the company has rid itself of nine non-essential businesses, including defense, software, and notebooks. It also has made three acquisitions and forged a number of alliances.