10-QPeriod: Q1 FY2012

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 4, 2012For Securities:TXN

Summary

Texas Instruments (TXN) reported a decline in revenue for the first quarter of 2012 compared to both the prior year and prior quarter, primarily driven by a significant reduction in its Wireless segment, specifically baseband products, as the company continues its exit from that area. Despite the revenue drop, the company highlighted signs of recovery in the broader semiconductor market, with increasing orders and a growing backlog. Management expressed optimism about the company's core Analog and Embedded Processing businesses, which showed resilience and were positioned as future growth engines. The integration of National Semiconductor (now Silicon Valley Analog - SVA) into the Analog segment is progressing, contributing to segment revenue growth. The company is actively managing its operations, including restructuring efforts to close facilities and a focus on shifting investments towards growth areas. While facing ongoing challenges from market cyclicality and the ramp-up of integration costs, TI anticipates a good year for growth in 2012.

Financial Statements
Beta

Key Highlights

  • 1Revenue decreased by 8% year-over-year to $3.12 billion, impacted by the planned exit from the Wireless baseband product line.
  • 2Net income fell to $265 million ($0.22 diluted EPS) from $666 million ($0.55 diluted EPS) in the prior year's quarter.
  • 3The company reported an increase in R&D expenses by 21% year-over-year, partly due to the inclusion of National Semiconductor (SVA) operations.
  • 4Operating profit margin declined significantly to 12.7% from 26.8% in the prior year's quarter, heavily influenced by acquisition-related charges and lower revenues.
  • 5Texas Instruments is actively managing its semiconductor manufacturing facilities, including plans to close two plants, with associated restructuring charges.
  • 6Orders increased by 13% sequentially, indicating potential recovery in the semiconductor market, with growing backlog and broad-based order increases.
  • 7The company's strategy focuses on Analog and Embedded Processing segments as key growth drivers, with continued investment in these areas and diversification of the Wireless segment away from baseband products.

Frequently Asked Questions

The primary reason for the year-over-year decline in revenue was the significant decrease in revenue from the Wireless segment, specifically from baseband products, as Texas Instruments continues its strategic exit from this product line.

The acquisition of National Semiconductor, now integrated into the Analog segment as Silicon Valley Analog (SVA), contributed to a 10% increase in Analog segment revenue year-over-year. However, it also led to increased operating expenses, including R&D and SG&A, and significant acquisition-related charges impacting overall profitability.

Texas Instruments sees early signs of growth in the semiconductor market, with sequential increases in orders and a growing backlog. The company believes the semiconductor cycle bottomed in the first quarter of 2012 and anticipates a good year for growth in 2012, supported by a strong product portfolio and design position with customers.

The company is undertaking restructuring actions, including plans to close two semiconductor manufacturing facilities in Houston, Texas, and Hiji, Japan, by mid-2013. These actions are expected to incur total charges of approximately $215 million and are part of efforts to optimize operations and manage costs.