This summary is based on the first quarter fiscal 2007 earnings call conducted by Texas Instruments Inc. (TXN) on April 23, 2007.
Chief Financial Officer, Senior Vice President: Kevin March
Vice President & Manager, Investor Relations: Ron Slaymaker
Key Investors Issues
- Earnings per share rose to 35 cents compared to 33 cents in the prior year.
- Quarterly revenue dropped 8% over last year to $3.19 billion.
- For Q2, the firm expects earnings per share to be in the range of 39 cents to 45 cents.
First Quarter Fiscal 2007 Financial Highlights
Texas Instruments reported revenue of $3.19 billion for the first quarter of 2007.
The revenue declined 8% compared with the prior quarter and 4% compared with the year-ago quarter. Revenue was impacted by an inventory correction in the semiconductor market.
The first quarter''s sequential decline in
semiconductor revenue was broad-based across most product areas. Total semiconductor revenue declined 8%, with both analog and DSP revenue down 5% and the remaining revenue down 17%. Semiconductor revenue was down 4% from a year ago, as lower DSP revenue more than offset growth in analog.
The
DSP product revenue declines of 5% sequentially and 10% from a year ago were similar to the wireless trends. Outside of wireless, most of the DSP product lines declined sequentially. From the year ago quarter, revenue declined in areas such as high density voice and catalog products. In both comparisons, the firm saw DSP growth in automotive navigation systems and industrial control.
Total
analog product revenue declined 5% sequentially, although grew 2% from the year ago quarter. The sequential decline was across most analog products. The growth from a year ago was comprised of growth in high performance analog, automotive and broadband modems that was partially offset by a decline in wireless analog revenue. High performance analog revenue declined 5% sequentially and grew 8% from a year ago.
Revenue from
wireless applications declined 7% sequentially and was down 9% from a year ago. For cell phones, 3G revenue grew sequentially, as the firm believes that the excess inventory in this segment of the market was mostly cleared in the second half of last year. Revenue from mid range and low end products declined as inventory was reduced in the market. Compared with the year ago, 3G revenue was about even, while mid range and low end revenue declined.
Wireless infrastructure revenue declined sequentially, although was up strongly from a year ago. The opportunity for TI in the wireless market took a big leap forward in the first quarter, when the firm announced a significant design win at Motorola to jointly create a 3G solution customized to their needs. Beyond the current customer engagements, Motorola is an important strategic opportunity to drive higher 3G revenue and the firm is pleased that it has won this program as part of a far-reaching engagement with that customer.
In
DLP products, first quarter revenue declined 30% sequentially and 15% from a year ago. As explained in January, the front projector market was reducing excess inventory in the quarter, whereas the firm believes that the TV and cinema markets were positioned with desired amounts of inventory. The decline from a year ago was due to lower projector revenue.
Earnings per share from continuing operations were 35 cents, a decline of 10 cents from the prior quarter.
The fourth quarter of 2006 included a benefit of 5 cents from the reinstatement of the federal research tax credit and a benefit of 1 cent from catch-up payments associated with new patent license agreements. Net income was $516 million.
Gross profit was $1.64 billion, or 51.3% of revenue.
This was down $111 million from the prior quarter and down $35 million from the year-ago quarter due to lower revenue. Despite the decline in revenue and less royalty income, gross margin expanded by 80 basis points sequentially, as the firm pulled back on production costs faster than the revenue declined.
Research and development (R&D) expense was $552 million.
Despite seasonally higher pay and benefits, this was about even with the prior quarter due to cost-saving actions. R&D expense increased $19 million from the year-ago quarter due to higher product development costs in the company’s Semiconductor segment.
Selling, general and administrative (SG&A) expense was $405 million.
