During a conference call this afternoon, chip giant Texas Instruments (TXN) discussed factors that caused the company to slash its revenue and profit outlook for the current quarter well below what it had previously promised.
TI’s head of investor relations, Ron Slaymaker, provided the prepared remarks about the quarter’s trends, though he declined to go into particular segments of the business.
The reduction in outlook is a result of “broadly lower demand across a wide range of markets, customers and products, except for wireless applications processors,” said Slaymaker, repeating the brief statement that was in this afternoon’s press release.
Uche Orji of UBS asked whether there were any one-time items that were affecting earnings per share.
Slaymaker said there were, in fact, some items. Mix of products is unfavorable this quarter, he said. “We’re seeing downside versus our expectations in some of the more profitable areas such as networking infrastructure, and in catalog products, but upside in wireless.”
Slaymaker said utilization was also affected, as the company reduced production loadings.Underutilization expense will, consequently, be higher this quarter. He said the company would also have $20 million in extra acquisition expenses.
UMTS wireless systems are weaker in North American wireless, he said, alluding to the uncertainty at AT&T (T) and T-Mobile USA pending their attempted merger.
In computing, computing overall was down, with declines at storage or disk-drive customers exacerbated by the flooding in Thailand. Television and video game console customers also saw reduced demand.
Sales into automotive are about flat sequentially, he said.
Orji asked if the company still foresaw a “bottoming” to the chip industry. Slaymaker said the company does believe it is “in the bottoming process. TI chips at customers and distributors are very low. At some point, our revenue will grow and our shipments increase even if there is no increase in end demand. Once customers regain confidence in their own outlook, they will typically layer in additional inventory.”
Regarding orders, Slaymaker said, “Total orders will likely decline some from the prior level,” he said, including a seasonal impact from calculators, and “lumpiness” in baseband processors.
Distributors and customers are both “clearly reducing inventory.”
“At the OEM customers, inventory is being reduced and we are under-shipping those customers’ demand levels.”
Asked about efforts to protect gross margins, Slaymaker said the company had no intention of cutting any production capacity. “We have no intention to take the new capacity we’ve brought on and doing anything other than fill it up over time.”
“I don’t have an exact time period as to when that snap-back could occur,” said Slaymaker, when pressed on how long it would take for the industry to reach bottom. “We’ll have to see what this one [correction] holds. We continue to be encouraged we’re in the bottoming process.”