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Monday, September 25, 2006

Texas Instrments: The Problem With Buybacks

Texas Instruments is buying back more stock. With the poor performance of the stock since late April, it may be a sign that the company needs s little something to shore up investor confidence. In the last five months, the shares have dropped from about $36 to $32. Over the last three months, the TXN stock has done no better than the S&P.

TI did narrow the range of its forecast for the current quarter. Some investors were befuddled because cell phone sales have been doing well, and companies like Samsung are indicating that handset sales will be better in 2006 that was originally anticipated.

But, TI is not talking like it is in a hot market, so it may be that it is losing share in the cell chip market, or that some of its other units are not doing as well as was expected. So, the $5 billion share buy back the company has just announced could be viewed as the board giving a vote of confidence to the company’s long-term prospects or it is possible that a weak EPS outlook needs to be offset by lower shares outstanding.

The issue of what is behind the share buyback and TI’s relatively weak stock price will have to wait until the next quarter is announced. But, Wall St. is not exactly celebrating the money the company is putting into it own shares.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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