Good things come in small packages. But when you have a surfeit of product just sitting around and waiting to be packaged, you have a problem. That's what's going on with Texas Instruments
Last night, the Texan maker of microchips narrowed its fourth-quarter guidance down to the upper half of the original estimate. TI now expects to make a profit of $0.47 to $0.51 per share on sales near $3 billion. That's fine and dandy, but could have been much better.
See, TI can't keep up with current demand for its chips. Its largest customer, Nokia
"Demand does continue to lead our supply of components," said TI spokesman Ron Slaymaker, later explaining that the supply constraint comes from the testing and packaging department. Many of TI's competitors, like Marvell Semiconductor
In fact, TI thinks of the internal testing and packaging capacity as a competitive advantage, and invested $1 billion in a new facility in the Philippines this year. It looks like that strategy backfired a bit -- and the market caught on to this fact. Texas Instruments stock is down 2.5% today, despite the upbeat guidance update. That hit brought TI down to levels not seen since -- well, about a week ago. The stock is up a market-crushing 64% this year anyway.
In other words, don't panic. TI is doing all right -- it’s just not perfect.