Texas Instruments Blames Trade Tensions for Disappointing Forecast, Chip Makers Fall
October 23 2019 - 12:20PM
Dow Jones News
By Maria Armental
Texas Instruments Inc. (TXN) blamed jitters around U.S.-China
trade tensions for largely disappointing third-quarter results,
projecting more challenges in the current quarter.
The Dallas-based chipmaker, often seen as a bellwether in the
sector because of its broad base of customers and range of
products, on Tuesday said it expects fourth-quarter profit to fall
to a range of 91 cents to $1.09 a share on $3.07 billion to $3.33
billion in revenue, well short of analysts' projected $1.28 a share
in profit and $3.57 billion in revenue, according to FactSet.
"We are at the very end of a long supply chain," Chief Financial
Officer Rafael Lizardi said in a conference call with analysts.
"And when the ones at the very front pull back, it becomes a
traffic jam."
Mr. Lizardi said the challenges are widespread from what the
company has seen. "But we'll see what other companies will report
over time and we'll get a clearer picture," he said.
Cascend analyst Eric Ross said in a note published Wednesday
that his data suggests the poor December-quarter guidance is more a
TI-specific issue--losing share in microcontrollers and
communications-- rather than an industry issue.
"This is not our 'opinion' -- this is what we see in the data,
and what other companies are saying," Mr. Ross wrote, noting that
some industry data suggest a recovery is under way.
TI shares, which have been trading near record levels, fell 7%
to $119.96 Wednesday, pulling down other chip makers, including
Nvidia Corp. (NVDA), Micron Technology Inc. (MU), Intel Corp.
(INTC) and Advanced Micro Devices Inc. (AMD).
Wednesday's $8.61 decline is on track for the second largest
one-day decline on record.
Founded in 1930 as an oil-and-gas company, Texas Instruments
took its current name in the 1950s as it shifted into the
burgeoning semiconductor business. Today, it is one of the world's
largest chip companies.
TI's third-quarter profit fell 9% to $1.43 billion, or $1.49 a
share, at the high-end of the company's forecast and ahead of the
consensus estimate. But revenue missed Wall Street expectations,
falling to $3.77 billion, an 11.5% decline from the comparable
period last year.
It was TI's fourth consecutive quarter of falling revenue since
the current semiconductor downcycle began, and the largest
percentage decline. And company officials warned it would take
time, given the added weight of the trade dispute.
"Customers are just far more cautious than they were certainly a
year ago, but even 90 days ago," Mr. Lizardi said, noting many of
those customers referred to the trade tensions.
Company officials said the weakness in the third quarter was
broad-based but hit particularly hard automotive and
communications, driving a 19% revenue decline in embedded
processing, the "brains" of many types of electronic equipment.
Credit Suisse analyst John Pitzer said the segment's performance
seemed "demonstrably worse" than peers and, assuming another
sequential decline in the December quarter, more pronounced than in
the financial crisis "when financial markets weren't working
properly and companies couldn't actually get funding for
inventory."
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
October 23, 2019 12:05 ET (16:05 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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