Texas Instruments (Nasdaq: TXN ) , the company that makes chips used in a variety of products ranging from mobiles phones to automobiles, came out with a weak earnings forecast that fell below analyst expectations. The Dallas-based company expects revenue to be in the range of $2.99 billion to $3.11 billion, against analyst estimates of around $3.16 billion. Poor demand for wireless products was cited as the reason. And Texas Instruments isn't the only one to post a weak outlook.
Altera, another chipmaker, has also forecasted lower revenue because of weak sales across all of its business verticals, except for sales to the military.
Blame it on the customers
Texas Instruments won orders from Amazon.com (Nasdaq: AMZN ) in the fourth quarter last year for the supply of Wi-Fi and processor chips. While the company's conference call revealed very little, analysts speculate that it might have something to do with flagging sales of the Kindle Fire tablet, which uses Texas Instruments' OMAP processor.
But the situation at Amazon is probably not the only reason. Texas Instruments supplies chips to Nokia (NYSE: NOK ) and Research In Motion (Nasdaq: RIMM ) as well. And as you probably know by now, these two companies have not exactly been making big bucks of late. Nokia recently reported fourth-quarter losses amounting to almost $1.4 billion. RIM also slipped into the doldrums, with net profits shrinking by more than 70% in the fiscal third quarter.
The way ahead
The good news is that demand continues to remain upbeat for the rest of the company's businesses. For instance, its network infrastructure and automotive segments have been looking particularly strong of late.
Besides, the company can look forward to a better second quarter as client inventories deplete and order growth returns. Add to this the growing popularity of smartphones and tablets, and Texas Instruments can surely look forward to some good results in the coming months, but that again would be linked to the fortunes of its customers.
The Foolish bottom line
While Texas Instruments' wireless segment is likely to see a slowdown for some time, it should not undermine the company's growth and profitability in the long run. The stock may not have a huge dividend yield, but there are enough reasons to feel optimistic about the company for the year ahead.
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