TI cuts Q3 outlook; Smartphone demand slowing?

Summary:Texas Instruments says its wireless unit struggled as customers pulled back on orders amid economic worries.

Texas Instruments cut its third quarter outlook as customers pulled back on orders for its wireless products. The results may indicate that growth is slowing in smartphone demand.

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For the third quarter, Texas Instruments projected third quarter earnings between 34 cents a share and 42 cents a share. Revenue in the third quarter will be $3.21 billion to $3.47 billion. Wall Street was expecting Texas Instruments to report third quarter earnings of 50 cents a share on revenue of $3.54 billion.

In a statement, TI CEO Rich Templeton said that the company's analog and embedded processors performed well. Wireless demand fell. Templeton said:

Although we believe customers and distributors have low inventory levels, the global economic environment is causing both to become increasingly cautious in placing new orders. Our backlog grew last quarter but orders slowed in the month of June and our backlog coverage for September is lower than normal.

Indeed, TI's wireless unit posted an operating loss of $51 million on second quarter revenue of $342 million, down 39 percent from a year ago. TI also said that its inventory was $1.88 billion at the end of the third quarter, up $123 million from a year ago.

TI's results follow Qualcomm, which lowered its demand and revenue outlook . Qualcomm will gain from a fourth quarter launch of Apple's iPhone 5, but the smartphone industry is being rattled. As a result, component suppliers that don't cater to Apple and Samsung are likely to take a hit as RIM, Nokia and HTC struggle.

Qualcomm shipped 141 million chipsets in its fiscal third quarter, below its 144 million to 152 million guidance. Wells Fargo analyst David Wong said:

Qualcomm’s September outlook is similar to other major chip companies such as Intel and Xilinx that have also indicated September quarter sequential revenue expectations that we consider to be to the lower end or below a normal seasonal range. We think this is a reflection of a soft macroeconomic environment.

Texas Instruments' second quarter earnings were better-than expected excluding charges. TI reported second quarter earnings of $446 million, or 38 cents a share, on revenue of $3.34 billion. Excluding restructuring charges and the acquisition of National Semiconductor, earnings would have been 44 cents a share. Wall Street was expecting earnings of 41 cents a share on revenue of $3.35 billion.

Topics: Mobility, Hardware, Processors, Smartphones

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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