Texas Instruments (TXN) tightened its third-quarter revenue and earnings outlook range but kept the mid-point of that range unchanged, as demand for personal computers and televisions show signs of weakness in a sluggish economy.
Although the semiconductor company said the quarter was tracking consistently with its initial expectations, the narrowed outlook was reflective of broader economic issues that plague the semiconductor industry. Intel Corp. (INTC), the industry leader, had warned in late August that a slowdown in demand for consumer PCs in mature markets would eat into its third-quarter sales. The warning had sent a wave of concern through the PC industry as it came barely a month after July’s robust numbers from Advanced Micro Devices (AMD) and Intel itself. Intel, the world’s largest chipmaker, had termed its second-quarter performance as its best ever.
However, there has been much water under the bridge since then. Booming sales of tablet computer devices such as Apple Inc.’s (AAPL) iPad and smartphones are taking share from desktops and notebooks, prompting order cutbacks further up the food chain. Although PC makers have tried to boost sales by resorting to such temporary measures as price cuts, the move has not had a noticeable bearing on sales so far. In a shaky economy, consumers are perhaps too disinclined to upgrade their computers.
Dallas-based Texas Instruments, which competes with chip makers Qualcomm (QCOM) and ST Microelectronics (STM), said it now expects earnings per share for the third quarter to range between 66 cents and 72 cents, compared with its prior view of 64 cents to 74 cents per share.
The semiconductor company now sees third-quarter revenue in the range of $3.62 billion to $3.78 billion, versus its prior projection of revenue of $3.55 billion to $3.85 billion. The midpoint of the new revenue and EPS outlook is 69 cents and $3.70 billion, respectively, unchanged from the midpoint of previous guidance.
Additionally, Texas Instruments noted lukewarm consumer acceptance of some of the new 3D television models and lower than expected demand for flat screen TVs, coming off the strong World Cup soccer season.
However, the company was of the view that expansion of wireless services in India would boost sales sometime in the near term.
We have a Zacks #3 Rank (short-term Hold recommendation) on Texas Instruments’ shares.