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I Shouldn't Have Messed With Texas

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I don't know what they put in the water in Dallas. Texas Instruments (NYSE: TXN  ) can sure take a licking and keep on kicking.

The mid-quarter tightening of the company's guidance inspired an immediate price drop, but the discounts didn't last. At the time, I said that "you can safely leave TI alone for now, despite a seemingly tempting buy-in opportunity." If you wanted a nice dividend stock with a tech pedigree, you were supposed to do better with Intel (Nasdaq: INTC  ) .

But the market clearly didn't listen. Since that seemingly negative business update seven weeks ago, Texas Instruments' shares have climbed by 21%. Tuesday's final third-quarter report did nothing to send the stock back to the deep-discount bin. The stock has, in fact, outperformed Intel. That "tempting buy-in opportunity" was for real this time.

In the third quarter, Texas Instruments' sales grew 30% year over year and 7% from the previous quarter despite the avowed slowdown in consumer spending. The general consumer slowdown was countermanded by stronger sales of embedded chips to the industrial sector, and also by the continued health of the smartphone market, where the company's OMAP processors provide strong competition to the Snapdragons of Qualcomm (Nasdaq: QCOM  ) and the Hummingbirds of Samsung.

Earnings improved by 69% from the year-ago period to $0.71 per share, helped by a generous buyback program. Cash flows were even stronger than earnings, which is something we Fools love to see. Texas Instruments is not afraid to spend money to make money, as evidenced by opportunistic expansions of its in-house manufacturing capacity. The only real negative of this report was the book-to-bill ratio lingering at 0.92, below the magic 1.0 mark that indicates orders coming in at least as fast as the company can ship them out. The company's management largely agrees with Atheros Communications (Nasdaq: ATHR  ) when it says that the slowdown should bottom out in the coming quarter, which would make this a short-term concern.

I like what I see in Texas. The Fool owns this stock for good reason.

Fool contributor Anders Bylund doesn't hold a position in any of the companies discussed here. Intel is a Motley Fool Inside Value pick. Atheros is a Motley Fool Hidden Gems selection. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Atheros, Intel, Qualcomm, and Texas Instruments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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