Green shoots in Texas Instruments' first-quarter earnings

Relative to previous quarters, the first quarter wasn't all that great -- but it's an improvement. The company logged $265 million in net income and earnings per share of 22 cents. (In 4Q11, it net $298 million from revenues of $3.42 billion; in 1Q11, it net $666 million from $3.39 billion in revenue.)

"As we expected, our business cycle bottomed in the first quarter, and early signs of growth began to emerge," CEO Rich Templeton said. "Orders were up 13 percent, and backlog is growing again. Particularly encouraging is the breadth of increased orders across geographical regions and markets, including the industrial sector."

A few highlights and lowlights:

• Sales in TI's Analog group were about level with the prior quarter. Silicon Valley Analog is the former National Semiconductor, which TI acquired last year for $6.5 billion.
• Sales in the Embedded Processing group were up 7 percent, led by growth in the automotive and communications infrastructure markets.
• Sales in the Wireless segment declined sharply as the company entered the final phase of its exit from baseband products. The silver lining: these represent less than 3 percent of total sales this quarter.
• The digestion of National Semiconductor is still a bit of a drag on the financials. Related charges, from retention bonuses to factory closings, tallied $174 million this quarter.

On an earnings call, investor relations VP Ron Slaymaker offered more detail into the reinforcement activities the company is currently undertaking:

Core products were 78 percent of our first-quarter revenue, up from 71 percent a year ago and 66 percent two years ago. As these products continue to make up a higher proportion of our revenue, our business is becoming more diversified across customers and markets. For example, in 2009 we had a single customer that made up more than 20 percent of TI revenue. In first quarter 2012, it takes the combination of our top six customers to exceed 20 percent. We now have more than 90,000 customers and no single customer comprises more than a mid-single-digit percentage of our revenue. We believe this expanding diversity is strong evidence that our large sales force and broad customer footprint are paving the way not only for TI share gains, but also for results that will be determined more so by our own execution in the years ahead, and not swung by the fortunes of a particular customer or narrow market segment.

On the whole, 2012 is expected to be a year of growth, assuming the global markets recover. "We believe growth will resume in the second quarter," Slaymaker said. Analysts, do, too: JMP Securities and Wedbush, for example, expect TI to outperform the market.

"We believe TI's better-than-expected top-line guidance validates our view that the semi industry's recovery has begun," Wedbush writes.

Let's hope so. While the company enjoyed modest gains, it still posted lower revenue (and subsequently lower profits) year-over-year, owing to reduced revenues from communications infrastructure (e.g. baseband products) and greater overhead from the newly-digested National Semiconductor. Year-over-year, orders were down 9 percent to $3.24 billion.

But things are looking up. Quarter-over-quarter, orders are up 13 percent and revenue is increasing. The company says it's building up inventory for an expected increase in demand, presumably as global markets stabilize and customers are more willing to spend again.

"We have our inventory well-staged and production in our factories ramping," Slaymaker said.

Outlook for the second quarter is as follows:

• Revenue between $3.22 billion to $3.48 billion
• Earnings per share between $0.30 and $0.38
• Another $100 million in acquisition charges and $10 million in restructuring charges.