Texas Instruments Reports 85% Profit Drop; Job Cuts Planned
Texas Instruments Inc. said Tuesday that third-quarter profit plunged 85% amid declining memory chip prices and that it will be forced to curtail capital spending and cut jobs.
The Dallas-based maker of semiconductors and other electronic components said it will offer early retirement to about 5,300 workers in an effort to cut costs. It will take an unspecified fourth-quarter charge based on how many employees accept the offer.
Texas Instruments also said it expects the $150-billion chip market to decline 10% this year and that it sees “moderate growth” in the market in 1997.
Profit from operations fell to $44 million, or 23 cents a share, from net income of $289 million, or $1.48, a year ago. Revenue fell 17%, to $2.84 billion from $3.43 billion.
The earnings, though much lower than a year ago, were better than analysts’ expectations of 20 cents a share.
Texas Instruments shares fell 50 cents to close at $55.125 on the New York Stock Exchange. The stock has fallen about 25% since reaching a 52-week high of $74.875 last Oct. 18.
Texas Instruments took a $192-million charge in the latest quarter for research and development associated with its purchase of Silicon Systems Inc. Including the charge, it had a loss of $148 million, or 78 cents a share, in the quarter.
Prices for dynamic random-access memory chips, or DRAMs, which are the main memory components in personal computers, have fallen about 80% in the last 12 months, Texas Instruments said. The memory chip operation posted a loss for the quarter, said the company, which declined to specify the amount.
Prices, which were 35% lower than in the second quarter, began to rebound near the end of the third quarter, but it was too late to help turn around the earnings decline, the company said.
The recent price increases reflect “inventory depletion and customers’ anticipation of seasonally stronger” personal computer sales, Texas Instruments said.
Because the recent price increase may be tied to the seasonal strengthening of demand, TI said, the company is unsure if demand will last or if prices will resume their decline.
Falling revenue from royalties also contributed to the decline. Royalty revenue was $117 million lower than in the year-ago quarter, primarily because of the expiration of a license with Samsung Electronics Co.
