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TI's big call
On the eve of their midquarter update, Texas Instruments COO Rich Templeton talks R&D, and more.
September 9, 2003: 1:15 PM EDT
By Eric Hellweg, CNN/Money Contributing Columnist

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SAN FRANCISCO (CNN/Money) - On Tuesday, Texas Instruments will hold its midquarter update conference, which is fraught with significance.

Why? Because the chip sector has been leading the tech recovery during the last few months. Texas Instruments (TXN: Research, Estimates), which has enjoyed the sector's rising-tide effect, needs to show that it's doing its part to keep the rally afloat.

I sat down with TI chief operating officer Rich Templeton at last week's SG Cowen conference in Boston to ask him about research spending, broadband religion, and digital-cinema opportunities.

Eric Hellweg: TI invested in R&D during the downturn. Have you given any thought as to when you will lower your R&D spending to get back on track with historical levels? Have you seen the kind of customer-order upturn that would warrant the change?

Rich Templeton: We've been trying to keep it contained, but if you look over the last six to eight quarters, you'll see it trending up on a slight basis, and that's a conscious choice. Even though those numbers are still above where we would like the targets for the business model, we'll make the better long-term choice right now to spend in the right places.

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What we look for in that situation is not improved orders or the economy, but are we translating that spending into customer successes, and are customers responding well to those products? Is it leading to the kinds of design wins and longer-term commitments that will drive the eventual growth that makes the investment pay off?

I won't forecast where our R&D spending level goes, but the goal is to get revenue back up, which in turn would get the R&D levels back down to the kinds of levels we like to see.

EH: In late July, Qualcomm (QCOM: Research, Estimates) announced a lawsuit against you folks. Has that lawsuit affected your plans to push further into the CDMA space -- a space essentially owned by Qualcomm? TI has traditionally focused on the GSM and GPRS side of the cell-phone standards battle.

RT: We're not backing off our commitment to CDMA. We've said very directly and very specifically we think the Qualcomm lawsuit is without merit. We're pressing ahead with our recent entry into the CDMA space, and we don't think it's a coincidence that this emerged at the same time we were sampling the CDMA market.

EH: TI derives the majority of its broadband division revenues from DSL as opposed to cable modems. With cable modems dominating in the United States, are you looking to grow the number of partnerships with those manufacturers?

RT: When it comes to broadband, we don't sell religion; we sell bibles. You're rarely right when you try to outguess who's going to win or what's going to win from a technology point of view.

From a customer point of view, we're working with cable modems with leading suppliers around the world. We've been working with Motorola (MOT: Research, Estimates) and a number of other manufacturers. But our opportunity in DSL isn't just client-side modems; it's in the central-office infrastructure equipment.

And when you're talking about central-office equipment, cable is a one-to-many infrastructure and DSL is a one-to-one infrastructure [which means more equipment is sold for DSL than for cable].

EH: TI is pushing into the digital-cinema space with its Digital Light Processing (DLP) chip. What kind of growth are you seeing with digital projectors?

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RT: That market is in its infancy, but it's an important market. We believe if you give people a great movie-viewing experience, people will leave the theater saying, "I'd like to bring that experience home." We have the ability to give them that experience in the home with a DLP-based TV [TI has a partnership with Samsung to power its digital televisions].

Every digital movie starts off with a DLP trailer, so it's very clear that what they're watching is DLP technology. When they go to Best Buy (BBY: Research, Estimates) and see a TV with a DLP sticker on it, they'll make that connection.

EH: So for TI, digital cinema is an opportunity to grow an even bigger market -- the market for digital televisions.

RT: Yes, but the numbers behind the exhibitor benefits are huge too: something like two to one in terms of revenue vs. classic analog films. It's a compelling story for the exhibitors. There's a lot going on, but we can't talk about it publicly. We have a download center in Burbank [Calif.] so producers and directors can critically review the quality and we can get their feedback.

EH: I know Steven Spielberg isn't a fan of digital cinema.

RT: Yes, but he's warming.


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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.