UPDATE: Texas Instruments 1Q Results Hurt By Japan Quake

Texas Instruments Inc.'s (TXN) first-quarter earnings rose 1.2%, but the chip maker said its results and second-quarter guidance were hurt by the earthquake in Japan and that uncertainty remains about potential supply chain disruptions.

Chairman and Chief Executive Rich Templeton said recovery of TI's Japan operations is progressing well, with one of the factories soon resuming full production and the other, which has already restarted initial processing of wafers, on schedule for full loadings in mid-July.

"Nonetheless, many of our Japanese customers remain in the early stages of reopening their own factories, and we and our customers face potential supply chain disruptions," Templeton said. "We expect growth in the second quarter, though it will be pressured by the situation in Japan."

The magnitude-9 earthquake and resulting tsunami, as well as the ensuing nuclear crisis in Japan, have highlighted the global dominance held by many of that country's makers of electronic components, and raised concerns that disruptions to their production could cause shortages and price spikes for products such as memory chips and liquid-crystal-display panels.

The company said it should have a "good" second half of the year, assuming consumer and enterprise demand remain strong.

"Underlying demand is quite strong," Chief Financial Officer Kevin March said in an interview. "At this point, we expect the second half to be pretty darn strong."

TI forecast current second-quarter per-share earnings between 52 cents and 60 cents, which includes 5 cents in costs for the Japan earthquake and aftermath, on revenue of $3.41 billion to $3.69 billion. Analysts surveyed by Thomson Reuters expected 62 cents a share and $3.52 billion.

"It doesn't look like they're seeing a huge impact from Japan," Bernstein analyst Stacy Rasgon said, noting that the company's revenue guidance is generally in-line with analyst expectations. "The outlook doesn't look bad."

TI shares, which have climbed 31% over the past 12 months, slipped 2.6% to $33.90 after hours. The company's quarterly earnings failed to surpass analysts expectations for the first time since the third quarter of 2008, according to Capital IQ estimates.

For the first quarter, TI reported a profit of $666 million, or 55 cents a share, up from $658 million, or 52 cents a share, a year earlier. Analysts on average were expecting earnings of 58 cents a share, according to Thomson Reuters. The earthquake lowered earnings by 2 cents a share in the first quarter, TI said.

Revenue rose 5.8% to $3.39 billion, in line with estimates

The company had recently narrowed its forecasts, calling for per-share earnings of 56 cents to 60 cents on $3.34 billion to $3.48 billion in revenue.

Gross margin fell to 50.9% from 52.7%.

TI has been increasing its focus on highly profitable analog and embedded-application chips and said earlier this month that it was buying National Semiconductor Corp. (NSM) for about $6.5 billion to boost its analog offerings, especially in areas like industrial power management.

It also has been winding down its business selling mobile baseband chips after major cellphone makers shifted to a multisupplier strategy. Along with the earthquake, first-quarter results also were hurt by weaker demand for wireless baseband chips by TI's biggest customer, Nokia Corp. (NOK).

"Underlying demand is strong, except baseband," March said. "That was the one end market that behaved in a manner we didn't expect. We believe the actual phones our principal customer is selling don't appear to be selling as well as the marketplace expected."

-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com

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