Texas Instruments net income grew by nearly 12 percent year over year, even as revenues remained flat in Q1.

The Dallas company reported net income of $411 million or 24 cents per diluted share on revenue of $2.97 billion, compared with net income of $367 million or 21 cents per diluted share on revenue of $2.94 billion for the same period a year ago.

"TI started 2005 with stronger profit performance despite a slower semiconductor market environment,” said CEO Rich Templeton, in a statement. “Higher utilization of the company's owned factories as well as lower manufacturing and operating expenses were largely responsible for improved profitability in a quarter where revenue declined sequentially.”

TI’s inventories were down slightly from Q4, a quarter when they were significantly reduced by $100 million, the company said. Because it had reduced inventories to where they should be in Q4, TI increased semiconductor production in Q1 to realign factory output with shipments.

Inventories of $1.24 billion at the end of the first quarter fell $11 million from the end of the previous quarter. Days of inventory at the end of the first quarter were 69, up from 62 days at the end of the previous quarter and 64 days at the end of the year-ago period.

“We believe the inventory correction in TI's standard semiconductor products at distributors that began in the third quarter of 2004 is complete, as demonstrated by sequential growth in revenue and orders for these products,” Templeton said. “We expect that the inventory correction associated with our DLP products used in high-definition televisions and projectors will continue into the second quarter, although the rate of reductions should subside.”

Templeton added that the environment for cell phones would likely support a lower growth rate than last year. Nonetheless, “we continue to have high expectations for our wireless operations in 2005,” he said. Year-over-year wireless revenue grew by 15 percent in Q1, but declined 14 percent sequentially after a strong Q4. 

For Q1, TI said that research and development costs increased by $8 million sequentially to $495 million or 16.6 percent of revenue due to higher semiconductor product development costs.  The total was about even with last year’s Q1.

Orders fell by $203 million year-over-year to $3.03 billion due to lower demand for semiconductors. But they grew by $84 million sequentially primarily due to seasonally higher demand for graphing calculators and higher demand for sensors and controls products.

Q1 capital expenditures of $277 represented a decline of $124 million from a year ago and a $66 million increase sequentially.  Much of TI’s Q1 capital spending went to equipment used for 65 and 90 nanometer wafer fabrication, and assembly and test operations the company said.

Looking forward to Q2, TI expects revenues of between $3.00 billion and $3.24 billion.  The guidance includes the sale of TI’s commodity LCD driver product line, completed in March. The business unit contributed $200 million to revenue in 2004, and contributed $39 million to revenue in Q1 of 2005.

TI is forecasting earnings per share of 25 cents to 29 cents.

The company continues to expect research and development costs to be $2.1 billion and capital expenditures to be about $1.3 billion for the year.

By: DocMemory
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