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Tuesday, October 24, 2006

Texas Instruments: Cell Slowdown Claims Another Victim

Stocks: (TXN)(MOT)(NOK)

TI’s revenues will drop in Q4. Revenue for Q3 was $3.76 billion. The company’s forecast for the next quarter is that revenue could go as low as $3.46 billion.

The slowdown in sales of cell phones has claimed another victim, trampled under foot the way that Motorola and Nokia were. The fact that cell phone prices are trending down will also hurt TI. At $31.50 TI’s stock is in the middle of its 52-week range of $36.40/$26.77. Now, that is not likely to change for the better anytime soon.

Two trends are likely to continue to plague TI. The first is that Nokia has signaled that it cannot get as much per phone as it did just one quarter ago, and that it hurting margins.

The second problem is that phone sales are actually slowing, if Motorola’s results are any clue. Wall St. hoped for handset sales of 55 million in the last quarter. Motorola delivered only 53.7 million.

The analyst crowd is saying the growth in worldwide handset sales could drop from a growth rate of 21.6% in 2006 to as low as 9.7% in 2007. Chip demand will obviously slow as well. And, to make matters tougher, TI customers are going to want a better price to help them deal with slowing demand.


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

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