Texas Instruments said weaker-than-expected orders from one mobile phone customer, identified as Nokia by some analysts, caused second-quarter revenue to miss Wall Street forecasts.
TI said, however, it held out hope for a strong third quarter.
Shares of TI fell 4.9 pct, which analysts attributed at least partly to a weaker-than-expected revenue report from tech giant IBM on Monday and some expectations for an earnings surprise from TI after Intel Corp issued a brighter-than-expected report last week.
While TI said current-quarter results could be better than Wall Street expectations, Chief Financial Officer Kevin March said revenue in the second quarter was hurt by one customer ordering fewer chips than expected.
They did not pull the inventory we'd expected in the quarter, March said in an interview without disclosing the client's name.
TI's biggest wireless chip customer, Nokia , had warned during the quarter its phone sales would be weaker than it had anticipated.
March said the problem appeared to be isolated to the one customer and not a reflection of wider market demand.
But this failed to reassure investors, who sent the company's shares down to $24.30 per share after their $25.55 close on the New York Stock Exchange.
Second-quarter revenue rose to $3.496 billion from $2.46 billion last year, but was slightly below analyst expectations for $3.52 billion, according to Thomson Reuters I/B/E/S.
Analysts said investors were too worried about the broader economy to buy shares on anything other than a perfect report.
It's both a good quarter and a pretty significant guide up, better than the Street, said Adam Benjamin, an analyst for Jefferies & Co. Right now the market is definitely jittery. I think in general, IBM is affecting the market.
Gleacher & Co analyst Doug Freedman also said investors appeared worried TI ended the quarter with lower revenue than they had expected.
The guidance looks pretty good, the market seems to be looking past the guidance and seems more concerned that this starting point is a little lower than people had hoped.
TI forecast third-quarter earnings per share of 64 cents to 74 cents on revenue of $3.55 billion to $3.85 billion.
Analysts on average were expecting earnings of 64 cents per share on revenue of $3.6 billion, according to Thomson Reuters I/B/E/S.
TI's second-quarter profit rose to $769 million, or 62 cents per share -- in line with analyst expectations and up from the $260 million profit, or 20 cents per share, it posted in the same quarter last year.
TI's March said he expects broad-based strength in demand will push up revenue and earnings in the current quarter.
In recent quarters TI has struggled to fill customers' orders in time, leading some investors to worry that it would face an inventory overload if its customers overcompensated by ordering too far in advance.
But March said demand was now strong enough that this should not be a concern.
Underlying growth in demand plus our market share gains seem to be more than offsetting any concerns people would have that we would see orders decline as customers start to pull their (order) lead times in, March said.
(Reporting by Sinead Carew and Alex Dobuzinskis; editing by
Bernard Orr and Sofina Mirza-Reid)