NEW YORK - Texas Instruments Inc,
best known for its mobile phone chip business, is turning to
analog and embedded chips instead to drive its growth, banking
on them to bring in 75 percent of its revenue in 5 years.
At its annual analyst meeting Thursday, TI set ambitious
growth targets for its analog and embedded chips, used in
everything from consumer electronics to industrial products,
but did not specify targets for wireless, which has been the
main focus among its investors.
Embedded chips now bring in 10 percent of TI's revenue, and
analog chips account for 40 percent.
"Growing at 20 percent a year over the next five years, you
have an analog business that's 60 percent of TI," Chief
Executive Rich Templeton said during a webcast of the meeting.
He noted that as the leading maker of analog chips, TI still
has only a 13 percent market share and plenty of room to grow.
He said embedded chips, including wireless infrastructure
chips, would account for 15 percent of revenue in five years if
it keeps up its current growth rate of about 22 percent.
TI last year fell to second place behind Qualcomm Inc
in phone chips, which account for about 30 percent of
revenue.
"We know there are levels of anxiety in the investor
community today, particularly in wireless," said Templeton at
the meeting where he gave a long-term target for total annual
earnings increase of 15 percent on revenue growth of 10
percent.
Charter Equity Research analyst John Dryden said that while
TI's wireless revenue looks like it could fall 7 percent both
this year and next, it was unlikely that the trend would
continue for the five-year period.
"(Templeton's) not saying wireless will be flat to down.
He's saying if these other businesses grow as fast as we
expect, any growth in wireless will be an upside to the
long-term growth forecast," Dryden said.
WIRELESS ANXIETY
TI did not give growth targets for its other businesses,
including calculators and digital television technology, which
represent about 20 percent of revenue.
Dryden said the guidance implied phone chips would account
for 15 percent to 20 percent of revenue in five years as top
client Nokia takes on new suppliers such as Broadcom
Corp and Infineon Technologies AG.
TI is already seeing the effects of a decision by Ericsson
, a parent company of joint-venture phone maker Sony
Ericsson, to buy chips from STMicroelectronics.
Templeton said its revenue from Ericsson would keep falling
quarter-to-quarter and annually until the third quarter this
year and start improving in the second half of 2009 when TI is
due to sell new chips to Ericsson.
But even as wireless declines in importance for TI,
Templeton called the idea of getting out of the handset chip
business "far-fetched" in response to a question.
He noted that its application chips supporting features
such as mobile video and web surfing, was key to wireless
growth.
"It literally will be the processor that connects billions
of people to the Internet over the next 10 years," the
executive said.
But David Pahl, TI's investor relations director, said that
as customers take on new suppliers and the industry matures,
analog is a bigger growth driver for TI than mobile.
"The opportunity we have in analog is so much greater," he
said, noting that about 4 billion of the world's roughly 6
billion people already have cell phones. "Wireless is still an
opportunity, but not like it has been in the last 10 years."
Templeton also said the company still expects to increase
its business at Nokia, the world's No. 1 mobile phone maker.
The executive said it could take "upwards of three
quarters" for TI to get its inventory levels back to normal, as
demand for its chips used in high-end phones was weaker than
expected in the first quarter.
But Templeton said the company would be careful not to
"over-correct" inventory levels, so that it would be ready when
demand starts to improve.
(Reporting by Sinead Carew, editing by Gerald E. McCormick,
Richard Chang)
By: Sinead Carew
Copyright 2008 Reuters. Click for Restrictions
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