I know that Texas Instruments (NYSE:TXN) prides itself on its portfolio of mixed-signal processors. Maybe I shouldn't be surprised, then, to see mixed signals in the company's earnings reports.
The press release is a bit disjointed, and even seemingly contradictory in some places. On the one hand, the 7% annualized revenue drop is explained by lower demand for TI's chips. On the other hand, the "orders" section says that the order backlog is growing because of "higher demand for semiconductor products and seasonally stronger demand for calculators."
The trick is to pay close attention to the reported periods. It turns out that demand and sales improved from the previous quarter across all segments, but decreased from the year-ago level just as ubiquitously. TI's error here is the confusing presentation, where year-ago and quarter-ago numbers dance around each other turn by turn until you don't quite know which is which and what goes where.
It helps to move down to the raw financial data tables, or just move on to our Fool by Numbers on the report. Still, I think investors deserve better than this halfhearted, disorganized jumble.
Looking past that gaffe, there is some good news. TI is enjoying the best gross margins it has ever seen, and has announced an official target take after cost of revenues of 55% or so. Starting from today's 52.1%, it doesn't sound like much of a stretch, and given that competitors like Analog Devices (NYSE:ADI), Maxim Integrated Products (NASDAQ:MXIM), and National Semiconductor (NYSE:NSM) all already enjoy gross margins around or above 60%, TI's target seems modest by comparison.
But before the partly outsourced business model, TI would have killed for a 50% gross margin, and these things move slowly when you're as big as the venerable calculator champ. This Texan will get there eventually -- and its highly efficient operations already show a better net margin than the competitors above. Start from a more generous top-level take, and good things are bound to happen.
Funny how such a focused operation can release such a sloppy presentation.
Ride 'em, cowboy:
- Digging in Texas Instruments' Vaults
- Fool on the Street: Texas Instruments in a Nutshell
- Texas Instruments' Surprising Move
Fool contributor Anders Bylund holds no position in any of the companies discussed here, but his TI calculator is old enough to get a learner's permit, and still runs on its original set of batteries. You can check out Anders' holdings if you like, and Foolish disclosure keeps its workspace neat and organized at all times.
