A deal with Samsung may help Texas Instruments Inc. soften its dependency on Nokia.

The Dallas-based company confirmed in a scheduled update to its Q2 business outlook late Monday that it has struck a deal with the consumer-electronics giant for a DSP image processor for Samsung camera phones.

TI has been without handset partnerships with Samsung and, instead, has relied heavily on Nokia in that area. Indeed, research firm the Lehman Brothers estimates that Nokia makes up 15 percent of TI's total sales and half of its wireless sales. But in Q1 Nokia lost some of its sales momentum in handsets, noting gains by competitors like Samsung, and said in mid-April that it expects flat sales in Q2.

"[The Samsung deal] is a nice opportunity. I certainly hope that it will be a door opener-type of opportunity," Ron Slaymaker, VP and manager of investor relations at TI said on the update's conference call.

"Samsung has been a high-priority targeted customer for TI and although it is already a strategic customer for us in areas such as DLP and various consumer electronic-type applications, we certainly continue to pursue a deeper relationship with them on the handset side of their business."

During the call, TI narrowed its expected revenue and earnings ranges, claiming strong demand across a broad range of its semiconductor products.

Total revenue is expected to be between $3.17 billion and $3.29 billion, compared with the prior range of $3.09 billion to $3.33 billion. Semiconductor revenue is expected to make up between $2.73 billion and $2.83 billion of the total, compared with the prior range of $2.65 billion to $2.85 billion.

"In general, we believe demand continues to be broad-based," Tim Luke, a managing director at Lehman, said in a research note after the call. "The company commented that all product lines are trending up in Q2 compared to Q1, and that business trends are meeting to slightly exceeding expectations.

"We recognize the potential impact on wireless business and DSPs of the recent challenges faced by Nokia, as well as some potentially more moderate trends at another wireless customer, Sony-Ericsson, may limit upside," he continued. "We consider any moderation in demand trends at Nokia may be partially balanced by what we estimate to be solid trends at Motorola and LG. We also note that it appears Samsung is utilizing a TI's imaging processor in handset design. Although we note that Samsung is not utilizing a typical application processor for handset design but a processor designed for still cameras, nonetheless it still may be a foot in the door to this key handset customer."

TI also raised EPS estimates to between 24 cents and 26 cents, compared with the previous range of 23 cents to 26 cents.

By: DocMemory
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