TI, the world's biggest manufacturer of chips used in mobile phones, joined Motorola Inc. and Nokia Corp. in blaming an expected June-quarter revenue shortfall on a buildup in inventory arising from the outbreak of the SARS virus.

Customers in the key China market stayed home at the beginning of the quarter because of concerns over SARS and strong competition from local Chinese wireless handset manufacturers further eroded sales at both Motorola and Nokia, the companies said earlier this week.

Dallas-based TI said it now expects revenue for the quarter ending June 30 to increase sequentially 5% rather than 7% as originally forecasted while earnings per share would be about two cents below its initial 8 cents estimate.

"As we noted in our April conference call, some inventory of wireless semiconductors was built in Asian markets, particularly China, toward the end of the first quarter," said Tom Engibous, TI's chairman, president and chief executive, in a statement.

"That inventory, which would have been successfully worked through under normal conditions, instead stalled as demand has weakened in those markets," added Engibous. "We believe the weakness in demand is largely due to the ongoing economic impact associated with SARS, and should abate as the health concerns are resolved."

TI said wireless semiconductor revenue would slide 10% from the immediately preceding quarter, reducing total chip sales by two percentage points.

Non-wireless chip sales should increase more than 5% helping to offset the weakness in demand from the mobile phone market, the company said.

TI said sales in its sensors and controls business as well as the educational and productivity solutions "remain on track to meet original expectations."

Still, the additional job cuts imply that TI executives believe the company needs to further rein in costs especially in the semiconductor segment.

In April, TI said while announcing its first quarter results that a total of 1,250 positions would be eliminated through the end of 2004 with about 800 of the job cuts occurring at the Attleboro, Mass., head office of its sensors and controls unit.

Only 450 semiconductor positions both in the United States and other international manufacturing locations were to have been eliminated.

The company said then that the job attrition in the chip unit was due to increased productivity at its manufacturing facilities.

As a result of the latest job cuts, restructuring charges to be taken in the June quarter will be as high as $55 million instead of the $40 million the company was anticipating.

By: DocMemory
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