Texas Hold 'Em

Considering that Texas Instruments (NYSE:TXN) signaled to the market in March that this quarter would be weak, it's no surprise that the results were completely uninspiring. First-quarter sales growth was nearly flat, with a 1% gain vs. the year-ago period, but the company did manage to eke out a larger 12% gain on the bottom line, thanks to margin improvements. But such large gains on the bottom line with flatness at the top can't continue for long.

TI crowed about its great inventory position, but I'm not buying it. With 8% inventory in the past year vs. sales growth of just 1%, the situation is not a disaster, but it's a trend in the wrong direction, and the inventory levels are nothing to brag about. On the bright side, though, Texas Instruments did keep its accounts-receivable balances in check.

Texas Instruments joins a crowded field of tech companies that have seen inventories pile up lately. In the past year or so, fellow tech firms such as Cisco (NASDAQ:CSCO) and Intel (NASDAQ:INTC) have also seen inventory levels grow faster than sales. Just look at the declining gross margins, increasing days of inventory outstanding, and the inventory growth that outpaces sales growth. Each on its own is a red flag, and more often than not, these problems travel in pairs or all together.

Even so, the earnings release makes TI sound upbeat about the future -- the company feels that its inventory problems are in the rearview mirror, with growth as the next stop. But there aren't exactly signs of robust growth ahead. We all may want to own a flat-screen TV that requires one of TI's DLP processors, but with lower prices on the units in the future a near lock, it seems most folks are holding off on making the big purchase. Eventually this, too, will change, but I think you'll see more of a positive inventory divergence in TI's numbers first.

While we all we wait for this growth, TI is willing to keep paying out a nominal dividend and buying back shares. Given that Texas Instruments is reasonably priced, that's pretty good news, because it's showing it has plenty of cash to burn, and buying back its reasonably priced shares while growth is slow is a great way to reward shareholders.

To read more about Texas Instruments and the always-fun analysis of inventories, check out:

• Bill Mann's "Sleepytime at Cisco"
• "Texas Toast" by Rick Munarriz
• My favorite bedtime tale: "The Inventory Story"
• "Intel's Mongolian Contortionist Act" by Bill Mann

Fool contributor Nathan Parmelee has no financial interest in any of the companies mentioned.