Texas Instruments Profit Falls; Will Cut 3,400 Positions

Texas Instruments posted a smaller-than-expected drop in quarterly profit Monday, sending shares of the chip maker up 5 percent after-hours, but the chip maker said it would cut 12 percent of its workforce.

TI warned that it could post a loss for the current quarter on a broad fall in demand for chips used in cellphones and other devices and said it was no longer looking to sell its merchant chip business after it failed to turn up a buyer.

L.m. Otero / AP

"The hope is that we'll start to find the bottom at these levels. That, along with expense reductions will create a greater flow through to the bottom line when revenue starts to recover,'' said Collins Stewart analyst Ashok Kumar.

However, Chief Financial Officer Kevin March said the company had no sense of how soon demand would recover as virtually all its customers in all regions and product segments were cutting orders.

"We left the quarter with a very low level of backlog which gives us considerably less visibility than normal ... We're preparing for what could be an extended down period in the economy,'' March told Reuters in an interview. "We can barely see out one quarter.''

TI said net profit was $107 million, or 7 cents a share, in the fourth quarter, compared with $756 million, or 54 cents a share, in the year-ago quarter. It said that the latest quarter included restructuring charges of 13 cents per share.

Excluding special charges, profit was 21 cents a share, better than the 12 cents forecast by Wall Street, according to Reuters Estimates.

Revenue fell to $2.49 billion from $3.56 billion, but was better than the average analyst estimates for $2.37 billion.

TI also said it was cutting 12 percent of its jobs, including 1,800 layoffs and 1,600 voluntary departures, and warned that current quarter revenue would fall even further.

For the current quarter, TI said per-share profit could range from a loss of 11 cents per share to a profit of 3 cents a share, including a 3 cents per share restructuring charge while revenue falls to $1.62 billion to $2.12 billion.

Analysts on average were looking for earnings per share of 3 cents, excluding unusual items, revenue of $2.04 billion, according to Reuters Estimates.

The report follows a worse-than-expected fall in profits at TI's biggest client, Nokia. The world's biggest mobile phone maker warned of an industry phone sales decline of 10 percent for 2009.

Shares of TI rose over 5 percent to above $15 following the results, after closing down 1.47 percent at $14.77 on the New York Stock Exchange.

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