Texas Instruments 2Q down on weak wireless sales

The Dallas-based chip maker reported net income of $588 million, down from $614 million in the same period a year ago. Earnings per share rose to 44 cents from 42 cents due to share repurchases.

Sales fell 2 percent to $3.35 billion. Analysts polled by Thomson Financial had expected profit of 46 cents per share on sales of $3.39 billion.

The results were at the lower end of the company's own estimates, which ranged from 43 cents to 47 cents per share in earnings and $3.33 billion and $3.46 billion in sales.

TI shares were down $3.48, or 12 percent, at $25 in extended trading after the release of the results. The shares last traded at that level in 2005.

The main culprit for the earnings decline was the business of selling chips for cell phones. Those sales have been falling for a while, but investors had taken heart Thursday from a healthy earnings report by Nokia Corp., the division's biggest customer.

"Other customers aren't faring quite as well as Nokia has," said Ron Slaymaker, TI's vice president of investor relations.

Sony Ericsson and Motorola Corp. are other big customers. Sony Ericsson reported a 9 percent sales drop last week.

Sony Ericsson has been shifting orders away from TI, but apart from that, Slaymaker said, the company is maintaining its share of customer orders.

"What you're seeing is just varying performance levels of our customers in their marketplace," he said.

The company also said overall demand from distributors fell unexpectedly in June as they reduced their inventory levels, partially because of "a weaker economic environment." TI's chairman and CEO, Rich Templeton, also suggested customers also had "greater confidence in TI's ability to deliver products within short lead times."

The company's largest division, which makes analog chips, continued to grow. Its output is used in a wide variety of industrial products and consumer gadgets such as digital cameras and music players.

The other thriving division makes chips that are "embedded" into cars and other industrial products.

TI said it expects third-quarter earnings of 41 cents per share to 47 cents per share on sales of $3.26 billion to $3.54 billion, below the Thomson Financial estimates of 51 cents per share and $3.56 billion, respectively.