Texas Instruments sees losses ahead

TI has been hit by falling revenue, which will probably get worse in the next quarter. Its wireless chip division is relying on GPRS and 3G to be successful
Written by Graeme Wearden, Contributor

US chip maker Texas Instruments (TI) has warned that it expects to make a loss in the third quarter of this year.

Announcing its latest financial results on Monday, TI said that third-quarter revenue is likely to decline by 10 to 15 percent, because of a drop in sales of semiconductors for non-wireless products. This will probably mean a loss of "a few cents" per share.

Company profits in the second quarter of 2001 were sharply down at £35m from £382m for the same quarter a year ago. TI blamed the bad news on the recent slump in the technology sector, which has meant lower demand for its products. "Make no mistake, this is a severe downturn, but we now see some signs of stabilisation," said Tom Engibous, chairman, president and chief executive officer of TI, in a statement.

Engibous added that it seems that the rate of sequential decline for the company's semiconductor orders has slowed. He also suggested there was evidence that revenue from semiconductor sales is nearing a bottom. However, chief financial officer Bob Aylesworth cautioned during a conference call that TI doesn't know whether it will return to profits in the fourth quarter of this year.

According to Ananova, Aylesworth said that the company was "optimistic" that GPRS networks will result in a boom in demand for feature-rich mobile phones, and thus an increase in sales of digital signal processors (DSPs).

DSPs, such as those made by TI, are widely used in mobile computing devices like "smart" mobile phones and MP3 players. TI is currently the leading maker of DSPs, with a market share of around 48 percent. A key part of its strategy is to maintain a dominant position in the mobile Internet market, by developing its Open Multimedia Applications Protocol (OMAP).

BT Cellnet and Vodafone both launched GPRS consumer networks this summer, although there is no indication yet of how many users have signed up.

GPRS is seen as a bridging the gap before high-speed third-generation (3G) services launch in a couple of years. But Vodafone's warning last week that it was delaying its UK 3G rollout because of a predicted lack of handsets is not good news for TI if it is relying on the popularity of feature-rich 3G smart phones to boost its wireless semi-conductor revenues.

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