Texas Instruments Fails To Impress-Minyanville

Texas Instruments Fails To Impress

Sean Udall Oct 21, 2008 2:45 pm


		Semiconductor leader could use a deal or two.

As I said in yesterday's Buzz, Texas Instruments (TXN) is suffering from two issues, which I will not belabor again here. I would not assign the broad based weakness in TXN and the guide down, which potentially translates to 20% lower revenues over prior year, to the whole wireless or analog chip space.

In my view, TXN has needed to make a transformative acquisition for some time and given the money it has spent on stock buybacks, it could have digested a good number of smaller wireless, networking and storage chip makers. Either that or it could have acquired a leader in one of those spaces.

Bottom line, I wouldn't use TXN as the baseline for semiconductors in general given its specific issues. Intel (INTC), for example, reported numbers that were not nearly as poor, and I wouldn't call the current PC or Servers space hotbeds for economic activity.

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Yesterday, I thought the sub $16's would present a value level for TXN and so far that seems to have held. TXN is still quite profitable and the cash flow yield is very high. Future catalysts for TXN would be a more aggressive acquisition profile and the pickup in Chinese cellular, which should occur as their overhaul takes place.

Meanwhile, I would rather favor chip names such as INTC, Applied Materials (AMAT), Microchip Tech (MCHP), or those companies in the networking space as I feel the respective situations are better and subsequent recovery will be stronger. However, TXN could change that assessment with one or two really smart deals.

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