Texas Instruments, Hit by $82.8-Million Loss, Plans Major Cutbacks

The hard-hit semiconductor and computer industries continued to take their toll on Texas Instruments, which reported its second consecutive quarterly loss and announced a major retrenchment Friday.

The Dallas-based company, whose losses in the third quarter climbed to $82.8 million, said it will reduce its manufacturing capacity, close two factories, eliminate 2,200 jobs worldwide and freeze wages for its remaining employees.

Texas Instruments “will benefit in 1986 and beyond from the cost savings resulting from these measures,” Chairman Mark Shepherd Jr. and Chief Executive Jerry R. Junkins said in a joint statement. “However, current market conditions indicate that these actions will not return the company to profitability in the short term.”

Latest in Series

Texas Instruments, once a major competitor in consumer product electronics, has been whipsawed by the fluctuations in the high-technology industries. The cutbacks announced Friday are the latest in a series of layoffs and plant closings during the past three years accompanying TI’s withdrawal from several markets.

Following yet another “strategic review” of operations, TI said it will pare back its semiconductor operations by closing an assembly and test site in El Salvador and a wafer-processing operation in Houston.

In its data systems business, the company said it will consolidate its operations into two factories in Texas from four, closing the factory in College Station. TI’s northwest Houston factory will be put up for sale, but employees will continue to work there until it is sold, a company spokesman said.

Closing the El Salvador factory will result in 900 layoffs, while consolidating the data systems operations will eliminate another 1,000 jobs. The remaining 300 jobs will be eliminated at various other operations, the spokesman said.

“We’ll be doing as much early retirement and transfers as we can,” he said.

The “reduction in force” will bring total layoffs for the year to 7,000, reducing TI’s total work force to 80,000, the spokesman said.

‘Necessary Step’

In addition, wage increases that would have taken place in the first half of next year will be deferred, TI said.

“We understand the personal impact of this decision on TI’ers throughout the world, but we believe this is a necessary step to keep operating costs under tight control during this difficult period,” the joint statement said.

TI took a $63.8-million charge in the third quarter because of costs associated with its most recent cutbacks. The company also took a $30.9-million income tax credit in the quarter.

TI’s net loss of $82.8 million came on sales of $1.2 billion, compared to net income of $85.8 million on sales of $1.4 billion in last year’s third quarter.

For the nine months ended Sept. 30, TI had a $77.6-million net loss, contrasted with net income of $251.5 million in the same period last year. Sales were $3.7 billion, down 12% from the year-ago period.

Texas Instruments said that, whereas its semiconductor and data systems businesses lost money, its geophysical exploration business broke even and its defense electronics, metallurgical materials and electronic controls businesses were profitable.

“This has been a tough, tough year for them,” said Jim McCamant, co-editor of the California Technology Stock Letter. However, because of its product lines, TI is not a good indicator of the semiconductor industry as a whole, which is just beginning to improve, he said.

Third-quarter results for other semiconductor firms “have been kind of rocking along the bottom,” McCamant said. “But there’s evidence that the fourth quarter is going to show some improvement in shipments and earnings.”

Separately, Verbatim Corp., a subsidiary of Eastman Kodak, reported a consolidation of its own to reduce costs. Those moves will result in a work-force reduction of about 400 employees.

Will Transfer Operations

Verbatim plans to transfer all diskette finishing, testing and packaging operations to its plants in North Carolina, Ireland and Mexico, the company said. However, Sunnyvale, Calif., will remain the world headquarters for marketing, administration and will be the primary technology center for Verbatim.

Texas Instruments said that its balance sheet “remains strong and financial resources are adequate to support our needs.”