Texas Profit Instruments posted a smaller-than-expected drop in quarterly profit, but said hello may post a loss in the current quarter and announced a 12 percent cut in jobs, as interest in cellphone chips fell.
But shares from the maker of wireless and analog chips rose 5 percent in after-hours trading on Monday as analysts said better–when compared with–estimated fourth quarter and also the cost-cutting measures meant TI might be positioned for growth when demand recovers.
“The hope is the fact that we’ll start to find the bottom at these levels. That, in addition to expense reductions, can create a larger flow to in general when revenue sets out to recover,” said Collins Stewart analyst Ashok Kumar.
TI said it was cutting its workforce by 3,400 to cut back costs, which American Technology Research analyst Doug Freeman said would “signal a recovery in earnings even when demand levels don’t improve.”
The corporation warned who’s still had tough times ahead, forecasting a possible loss for the first quarter, when utilization of its factories was anticipated to fall below 35 % from 48 percent within the fourth quarter. It said it anticipated to idle many factories for a lot of weeks in March.
Chief Financial Officer Kevin March told Reuters in an interview how the company had no sense of how soon demand would recover as virtually all its customers in most regions and product segments were cutting orders.
“We left the quarter having a suprisingly low degree of backlog, which gives us considerably less visibility than normal %u2026 We’re get yourself ready for what could be a long down period in the economy,%u201D March said. “We can barely see out one in four.%u201D
The report follows a worse-than-expected fall in profit at TI’s biggest client, Nokia (NOK1V.HE). The globe%u2019s biggest mobile maker warned of industry telephone sales decline of 10 percent for 2009.
For your current quarter, TI saw a loss of 11 cents to some profit of 3 cents per share, including a 3 cent restructuring charge. Analysts had forecast an income of 3 cents per share excluding the charge, as outlined by Reuters Estimates.
TI saw revenue falling to between $1.62 billion and $2.12 billion inside the first quarter, whereas analysts’ average estimate was $2.04 billion, according to Reuters Estimates.
WIRELESS WEAKEST
March said that while business was weak across the board with total orders down 42 percent, wireless was the weakest with revenue down 29 percent sequentially weighed against a typical fourth-quarter decline of about 3 %.
TI executives said the corporation had stopped trying to sell its merchant business, which makes off-the-shelf chips, after conversing with potential buyers. Instead, it might shut nearly all of its internal efforts for your unit and only support existing customers with minimal staffing.
“As we progressed, it became clear to us that a sale may not achieve exactly the same value that people will accomplish by retaining this operation and reducing an investment levels to the minimal required,” Ron Slaymaker, head of investor relations to the company, said over a call with analysts.
TI said it expects annual savings of about $700 million from cost cuts, including scaling down the merchant chip business as well as the workforce reduction, such as 1,800 layoffs and 1,600 voluntary departures.
March said about the conference call he expects both U.S. economy and global economy to decline in 2010.
March said on the conference call that he expects both the U.S. economy and global economy to decline this year.
He said the company would continue to aggressively drive down inventory in the first quarter. “I suspect we’ll look back on this and say its the worst downturn we’ve seen,” he said.
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