Tonight, semiconductor pioneer Texas Instruments (NYSE:TXN) is reporting earnings for Q3 2006, and one Fool put on his jingly thinking cap to give you the lowdown on expectations.

What analysts say:

  • Buy, sell, or waffle? Out of the 43 Wall Street analysts who cover TI, 25 have a buy rating, 16 go for "hold," and only two advocate a sale. In our Motley Fool CAPS service, the stock gets a thumbs-up from 22 all-star performers, while two of their peers have negative opinions.
  • Revenues. The average analyst forecast calls for $3.8 billion of sales, up from $3.6 billion last year.
  • Earnings. On the bottom line, analysts expect about $0.45 per share. Year-ago earnings were $0.41 per share.

What management says:
CFO Kevin March is excited about the company's place in the cell phone market, where it is the market leader in GSM-standard chips. The exciting part is that handset makers and service providers the world over are abandoning the older CDMA technology and moving on to the GSM platform in ever-increasing numbers, and the company stands to benefit greatly from that mass exodus. Sure, graphing calculators and Digital Light Processor television sets are respectable growth drivers, but they don't hold a candle to the worldwide cell phone market.

What management does:
Margins across the board are marching steadily skyward, in part thanks to the GSM movement I just mentioned. Net margins are just a hair behind industry-leading semiconductor makers Intel (NASDAQ:INTC) and Philips (NYSE:PHG) -- and they're still rising.

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

45.1

45.6

46.6

47.6

48.7

49.6

Op.

17.7

18.2

19.0

21.0

22.6

24.4

Net*

12.2

12.6

13.0

14.0

14.7

15.6
*Pro forma data excluding one-time items and income from discontinued operations.
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The just-completed quarter includes the back-to-school season, so those calculators should make a large contribution to the revenue pot. But excluding that seasonal pattern, the big story here is about cell phones. TI provides chips to Motorola (NYSE:MOT), Nokia (NYSE:NOK), andSony Ericsson, all of which recently reported between 33% and 43% year-over-year growth in handset shipments.

Texas Instruments added nearly $3 billion to its coffers by selling its Sensors & Controls business unit to a group of private-equity interests last spring. Speculation about a coming round of consolidations in the chip business runs rampant, and this cash stash puts the company in a good position to make some plays.

Not that there is a lack of ideas inside the firm, mind you. Texas Instruments' informal Lunatic Fringe still holds weekly "Sea of Ideas" meetings to ferret out great opportunities seemingly from thin air. In 2003, that group decided to design a power management solution that could cut cell phone power consumption to one-thousandth of the state of the art back then, and it met that goal in one year.

Like other technology companies, TI thrives on innovation. But all of that is for the future. Tonight, you can just expect boring old calculators and mobile phones to pull in the dough, and judging from the handset makers' reports, it should be a healthy haul indeed.

Competing calculators:

  • Hewlett-Packard (NYSE:HPQ)
  • Canon (NYSE:CAJ)
  • Sharp

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Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he still uses his TI-30 Stat calculator from his high school days. You can check out Anders' holdings if you like, and Foolish disclosure has all the answers.