RTTNews - Texas Instruments Inc. (TXN) said Monday after the markets closed that its second quarter earnings fell 56% from last year, hurt lower revenue and gross margins. However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations. The company also forecast third quarter earnings above analysts' current consensus estimate.

The world's second largest maker of mobile phone chips reported net income for the second quarter of $260 million or $0.20 per share, compared to $588 million or $0.44 per share for the year-ago quarter and $17 million or $0.01 per share for the previous sequential quarter.

Excluding restructuring charges, adjusted net income for the latest quarter was $315 million or $0.25 per share.

On average, 23 analysts polled by First Call / Thomson Financial expected the company to earn $0.18 per share for the second quarter. Analysts' estimates typically exclude special items.

Gross profit for the second quarter was $1.12 billion or 45.5% of revenue, compared to $1.75 billion or 52.2% of revenue in the second quarter of last year and $0.81 billion or 38.8% of revenue in the first quarter.

Dallas, Texas-based TI, which makes chips used in phones, telecommunications equipment, and calculators, said revenue for the second quarter fell 27% to $2.46 billion from $3.35 billion in the same quarter last year due to broad-based declines across all segments. Second quarter revenue grew 18% sequentially. Twenty-nine analysts had a consensus revenue estimate of $2.41 billion for the second quarter.

The company noted that the sequential improvement in quarterly revenue was mainly due to strength in its analog segment as well as a seasonal increase in calculators.

After sharp inventory corrections in our markets during the prior two quarters, our revenue levels are beginning to more closely reflect end demand, said TI Chairman, President and CEO Rich Templeton. As it will likely take some time before the economy strengthens, we have aligned our operations and expenses to be consistent with the weak environment. As a result, we are seeing healthy trends in our profitability.

In its mid-quarter update last month, the company had raised its second quarter earnings forecast to a range of $0.14 to $0.22 per share and revenue forecast for the quarter to a range of $2.30 billion to $2.50 billion.

Second quarter analog revenue fell 24% from last year to $983 million, mainly due to high-volume analog & logic. Texas Instruments is the world's largest maker of analog chips that process real-world inputs such as temperature and sound. Those products are used in everything from washing machines to robots.

Embedded processing revenue for the quarter declined 20% year-over-year to $350 million, mainly due to lower catalog product revenue. Revenue from automotive products also declined, although by a lesser amount, while revenue from communications infrastructure products was up.

During the quarter, TI acquired Luminary Micro, which expanded its embedded processing portfolio by more than 140 advanced, 32-bit microcontroller products.

Wireless revenue for the quarter dropped 33% from a year earlier to $601 million due to lower baseband revenue.

Other revenue for the quarter slipped 28% from a year ago to $523 million, mainly due to declines in royalties, DLP products, calculators, RISC microprocessors and ASIC products.

The company's orders for the second quarter totaled $2.80 billion, down 19% from a year earlier but up 27% from the prior quarter.

The company's inventory at the end of the quarter was $1.06 billion,down $588 million from a year ago and down $35 million from the prior quarter.

During the second quarter, TI used $251 million to repurchase 13.4 million shares of its common stock and paid dividends of $139 million, ending the quarter with cash and cash equivalents plus short-term investments of $2.56 billion.

Looking forward to the third quarter, the company said it expects revenue of $2.50 billion to $2.80 billion and earnings of $0.29 to $0.39 per share, which includes a negative impact of $0.01 per share resulting from restructuring charges. Analysts currently expect the company to earn $0.27 per share on revenue of $2.52 billion for the third quarter.

Looking ahead, we expect solid sequential growth in the third quarter. As end demand trends remain uncertain, we will keep our operations flexible so we can quickly respond to our customers' needs, Templeton said.

TI makes chips for both low-end and high-end mobile phones. The low-end, used primarily in emerging markets like India and China, earns less margin, however, works out well due to the high volume involved. The high-end has higher profitability and is used in phones having better features, used primarily in the developed countries. The company makes chips for digital cameras and televisions also, while its educational segment is known for the calculators it makes.

TI's results follow that of Intel Corp. (INTC), the world's biggest chipmaker, which last week reported better-than-expected second quarter results and provided upbeat revenue forecast for the current quarter.

In terms of stock performance, TI shares have lost 20.16% in the last 12 months during which Intel shares have fallen 14.94%. TI shares trade at 20.18 times estimated forward earnings, compared to Intel's 17.34 times.

TI shares, which have traded in a range of $13.38 to $29.14 over the past year, closed Monday's regular trading session at $23.61, up 60 cents or 2.61%. The stock is currently losing 21 cents in after hours trading.

For comments and feedback: contact editorial@rttnews.com