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Monday, July 10, 2006

Most Widely Traded 48 Hour Clock: TI Bad Bet On TV

24/7 Wall St. has begun coverage of the 36 most widely traded stocks, eighteen each from the NYSE and the NASDAQ. Most of these stocks trade over 50 million shares a week. This new feature will highlight each of the 36 stocks at least every 48 hours giving investors fresh infomation and perspective on the companies whose shares are most likely to move the broader markets.

Stocks: (TXN)(INTC)(AMD)

Texas Instruments has persuaded at least some of the major press that its move into handheld TV applications will be a big business for the company, and that small portable devices will replace PCs.

MarketWatch ran a large article that reflected much of the general storyline. TI's new chips will be the Intel Pentiums of the future as consumers use handheld devices for more and more of their information and entertainment. Companies like Nokia, Samsung and LG will make ever increasing numbers of these mini-TVs. ABI Research is even quoted as saying that there will be 514 million people subscribing to video services on these devices by 2011. Of course, this will spell the beginning of the end for Intel and AMD and their chips and the PC market slowly disappear.

The weakness of the argument rests more with common sense than research firm projection. The PC did not replace the TV, and the handheld device is not likely to replace either. These devices may be good for listening to music, but due to screen size, battery life and lighting issues, it is unlikely that people will replace either the computers or plasmas with a screen that is two inches square. The issue of whether networks can be built to deliver this over bandwidth that can reach millions of phones is also an issue that is not, and may not, be resolved.

It would be pointless to argue with TI's success. The only dispute is over whether it can become as large and important to the technology world as Intel is today. TI's market cap is now $45 billion on revenue of $13.4 billion in calender 2005. The company's revenue in 2004 was $12.6 billion, so the company's growth is solid. So are its margins. TI had operating income of $2.8 billion last year.

Intel's market cap is a little more than twice TI's at $105 billion. But, its revenue is nearly $39 billion. So, Intel's price to sales is about 2.8 times. TI's is higher at over 3.2. That is at least some indication of where the market is betting each stock will be valued over time.

It is too early to assume that Texas Instruments will push Intel off its perch as "king of the hill". There is a lot of proving to do about a word where consumers watch TV on a screen that is smaller that a credit card.

Douglas A. McIntyre can be reached at He does now own securities in companies he writes about.

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