The stars at night are big and bright
Deep in the heart of Texas.
The prairie sky is wide and high
Deep in the heart of Texas.
-- From Deep In the Heart of Texas (as made popular by Perry Como, George Strait, and many others)

Texas Instruments (NYSE:TXN) must be thanking its lucky star for the brilliant decision to go asset-light three years ago. Without the operational flexibility TI gets from outsourcing most of its chip manufacturing, I think that the fixed costs of doing business would bury the company today. Without them, TI is turning a profit.

It's no wonder that the semiconductor industry is full of TI's role models and copycats. The low-capital model just works too darn well to ignore, especially when order volumes suddenly drop the way they've done in recent months. Veterans of the fab-less or fab-light game like NVIDIA (NASDAQ:NVDA) and Qualcomm (NASDAQ:QCOM) have been proving the model's efficiency for years, only recently joined by the likes of TI, LSI (NYSE:LSI), and most recently Advanced Micro Devices (NYSE:AMD).

The market is bad enough that any edge in operational efficiency makes a big difference. TI just barely turned a profit in the just-completed first quarter, to the tune of $17 million or $0.01 per share. That's down from $662 million ($0.49 per share) a year ago and $107 million ($0.08 per share) last quarter. $2.1 billion in revenue is a 36% plunge year-over-year and a 16% drop from last quarter. Ouch.

"Demand for our products has begun to stabilize after sharp drops in the past two quarters," said TI's CEO Rich Templeton. However, he doesn't see an upturn anytime soon -- just an end to the free-fall. That's OK. That lean, mean business model lets TI make profits and cash flows even when the blood of Nokia (NYSE:NOK) and other large customers is filling the streets. It's just less business for TI's outsourcing partners, like United Microelectronics (NYSE:UMC).

And when the dark clouds scatter again, it's a simple matter of stepping up production with multiple manufacturing partners. As long as there's innovation in the Silicon Prairie, Texas Instruments will do good by its shareholders in the long run.

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