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TI trims jobs, beats 1Q
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April 17, 2001: 6:33 p.m. ET
Chipmaker to trim 2,500 jobs as it beats lowered first-quarter expectations
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NEW YORK (CNNfn) - Texas Instruments said Tuesday it would lay off 2,500 employees, about 6 percent of its work force, as it reported a sharp decline in first-quarter earnings that beat Wall Street's lowered expectations.
The layoffs are in addition to 600 TI announced in the previous quarter in an ongoing effort to cut costs at the No. 1 U.S. supplier of digital signal processors and analog semiconductors.
For the quarter ended March 31, Dallas-based TI (TXN: Research, Estimates) reported net income of $317 million, or 18 cents a share, compared with net income of $494 million, or 28 cents a share, a year earlier.
 Analysts on average expected first quarter results of 16 cents a share, according to earnings tracker First Call.
First quarter earnings included charges related to severance costs and the closing of manufacturing plants in California and Kentucky.
Sales for the quarter fell 8 percent to $2.5 billion compared with $2.7 billion a year earlier and analysts' estimates of $2.1 billion, according to First Call.
"We are on one of the sharpest decelerations that our industry has experienced, and it requires that we move fast to make hard, but prudent business decisions," TI Chairman Tom Engibous said in a statement. "The most difficult decisions are layoffs, because they affect our people."
TI said most of the layoffs, to occur in the second quarter, come from support functions and manufacturing and are expected to save about $400 million annually.
The company, which reported earnings after the closing bell Tuesday, also said it anticipates a 20 percent decline in second-quarter revenue as it continues to reduce excess inventory.
"It is unclear when demand for Texas Instruments' semiconductor products will strengthen," Chief Financial Officer William Aylesworth told analysts during a conference call Tuesday.
Pressure in the first quarter
TI said orders were down to $1.9 billion from about $3 billion in the year-earlier quarter. Semiconductor orders declined 42 percent from a year earlier.
Semiconductor sales totaled $2.2 million, down from $2.4 million a year earlier. That caused operating profit for the segment to come in at $304 million compared with $612 million a year ago.
Analog sales increased 2 percent from a year ago, but declined 17 percent from the prior quarter. DSP revenue decreased 28 percent from a year earlier. Together, Analog and DSP made up about 65 percent of TI's semiconductor revenue.
Wireless revenue declined 34 percent compared with a year earlier while catalog products sales, including DSP and high-performance analog, increased 4 percent form the year-ago quarter.
Broadband communications revenue, including DSL and cable modems was more than six times that of the year-ago quarter with DSL revenue up more than 50 percent.
Revenue in the Sensors & Controls unit was about even with a year earlier at $260 million as operating profit declined slightly to $51 million from $52 million a year earlier.
Educational and Productivity Solutions revenue grew to $81 million from $79 million a year earlier as operating profit increased to $17 million from $8 million a year earlier.
TI expects an increase in revenue from non-chip operations, including sales of calculators, which typically rise during the Fall back-to-school season.
The company anticipates spending less on research and development and trimming capital expenditures
TI's shares, which have been at less than half their 52-week high of $90, ended Tuesday down 99 cents at $34.00. They edged up to $35 in after-hours trading.
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The company's DSP and analog chips are the key operating components for everything from digital imaging equipment to wireless communications devices. Its chips are used in about two-thirds of the world's wireless handsets.
In late February, TI warned the Street of weaker first-quarter sales and earnings, blaming the slowing U.S. economy for the shortfall. At that time, the company said it expected sales to fall 20 percent from the $3 billion it logged during the prior quarter. When the company reported its fourth-quarter results in late January, executives had said they expected a sequential sales decline of 10 percent. Prior to that, they had forecast a slight increase in sales.
The warning prompted analysts to lower their first quarter estimates to 16 cents a share from 34 cents a share, according to First Call.
Because it has such a heavy exposure to the mobile phone market, TI is among the chipmakers that have been especially hard hit by the most recent industry downturn. Each of the top three mobile-phone makers, Nokia (NOK: Research, Estimates), Motorola (MOT: Research, Estimates), and Ericsson (ERICY: Research, Estimates), has reduced its sales forecast for 2001 and reported higher-than-anticipated inventory levels.
In response, TI took several cost-cutting measures during the first quarter, including idling several plants and eliminating 600 jobs, imposing a hiring freeze and shortening workweeks. 
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