Texas Instruments Warns Slowdown Will Hurt Earnings

Texas Instruments Inc. warned Monday that the economic slowdown would cause earnings to fall more than expected and said it will cut costs through voluntary retirements, a hiring freeze and temporary plant shutdowns.

Dallas-based TI said it now expects first-quarter revenue to fall 20% below fourth-quarter levels, instead of its previously projected 10% decline.

Analysts surveyed by First Call/Thomson Financial had put the company’s first-quarter earnings at 20 cents a share. In 2000’s fourth quarter, the company reported earnings of $549 million, or 31 cents a share, 2 cents short of expectations, despite a 15% increase in revenue to $3.03 billion.

Texas Instruments shares declined $1 to close at $29.15 on the New York Stock Exchange.

Rich Templeton, executive vice president and chief operating officer, said the company is responding to cancellations and rescheduled back orders after a persistent demand slump began in December.

TI officials maintained, however, that they will continue to aggressively market parts for the next generation of technology products.

“We continue to believe that [digital signal processing] and high-performance analog are the core technology drivers of the Internet age,” said Tom Engibous, TI chairman, president and chief executive.

Chris Chaney, an analyst with A.G. Edwards & Sons, said he hopes for some market stabilization by the second quarter.

“I think people are looking at Texas Instruments and saying, ‘Gosh, this is a great company in a bad environment.’ They will be among the first to turn around when the market does turn around,” he said.

TI said it has already shortened workweeks in some areas and reduced discretionary spending such as travel.

Plants in Merrimack, N.H.; Freising, Germany; Hiji, Japan; Santa Cruz, Calif., and in Houston will be shut down from one to two weeks on a staggered schedule, TI spokeswoman Donna Coletti said.

The company expects 500 to 800 workers to take voluntary retirement, said Coletti. About 2,600 workers are eligible for the program. The company’s work force numbered 42,400 at the end of last year.

Company officials have lowered their capital-spending plans for 2001 to $2 billion, a 30% drop from $2.8 billion in the previous year.

However, research and development investments at TI are increasing to an estimated $1.7 billion for this year, a boost from $1.6 billion in 2000, as the company retains one focus in digital signal processors.