TI, the world's largest maker of chips for mobile phones, said fourth-quarter earnings rose 2 percent from a year earlier, due to stronger demand for the company's semiconductor and calculator products.
While announcing the gains after the market closed Monday, TI executives also laid out streamlining measures for the coming years. The company already uses a mixture of its own factories and other suppliers to produce semiconductors, and executives said that outsourcing model would be extended to include the development of certain digital chips.
“That level of redundancy no longer makes sense,” said Ron Slaymaker, TI's vice president for investor relations. “This is an area where we realize we can gain further efficiencies.”
The company also said it would eliminate 500 jobs over the coming year by closing the Dallas chip plant as part of a cost-cutting measure designed to save some $200 million annually.
TI shares rose $1.26, or 4.4 percent, to $29.85 as trading opened Tuesday on the New York Stock Exchange. Shares have traded between $26.77 and $36.40 over the past year.
TI said it earned $668 million, or 45 cents per share, in the October-December period, compared with $655 million, or 40 cents per share, in the same period last year.
Revenue was $3.46 billion, up 4 percent from $3.32 billion in the same period a year earlier.
Without a 5-cent-per-share tax benefit from a federal research and development bill passed into law late last year, earnings for the quarter would have come in at 40 cents per share. Analysts surveyed by Thomson Financial expected earnings of 38 cents per share on $3.43 billion in revenue.
Slaymaker said growth in the fourth quarter slowed compared with the third quarter due to a combination of seasonally weaker sales and other factors.
“Challenges continue in the first quarter as we operate in an environment where customers want lower levels of inventory and where growth in the wireless market is skewed to low-priced, basic-featured cell phones instead of higher-priced, full-featured phones,” Rich Templeton, TI's president and chief executive officer, said in a statement.
TI said it believes earnings in the first quarter will range from 28 cents to 34 cents per share on revenue of $3.01 billion to $3.28 billion, just below Thomson Financial analysts' forecast of 35 cents a share. TI will release a more detailed midquarter update in March.
Analyst Cody Acree of Stifel Nicolaus & Co. said the fourth quarter was solid but he was concerned about the company's weak guidance moving into the first quarter. He agreed, however, that TI's decision on chip outsourcing was a more streamlined approach.
He said TI, like other chipmakers, faces the tricky proposition of trying to predict now what demand will be for its chips in a few months.
“Right now there's a lot of second guessing,” Acree said.
For all of 2006, the Dallas company earned $4.34 billion, or $2.78 per share, on revenue of $14.25 billion, compared with earnings of $2.32 billion, or $1.39 per share, on sales of $13.39 billion in 2005.
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