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Texas Instruments reports 30 percent increase in profits

Cost cutting pays off
Tue Oct 23 2012, 14:06
Texas Instruments

CHIPMAKER Texas Instruments managed to increase third quarter profits by 30 percent despite a marginal drop in revenues, thanks to cost cutting measures.

Texas Instruments, which has said that it wants to sell off its system-on-chip (SoC) division, announced impressive third quarter financial results despite revenues dropping slightly. The firm announced that its revenues fell two percent to $3.4bn, while profits rose 30 percent to $784m.

Texas Instruments' embedded and wireless operations fared badly, reporting steep declines in net income, with wireless racking up a $53m loss. The firm was helped to achieve its impressive profits by its analogue business, DLP imaging chips, custom ASIC designs and royalties, and even claimed that increased sales of its legendary calculators had helped.

Rich Templeton, chairman, president and CEO of Texas Instruments once reiterated that the firm is focusing on its analogue and embedded business units, saying, "These two core businesses now comprise 70 percent of our revenue. The importance of this strategy shows in the strong cash that we generate even in weak markets and in our ability to return that cash to shareholders. In the third quarter, our free cash flow exceeded $1 billion, and we returned more than 75 percent of it through dividends and share repurchases. Our confidence in the long-term sustainability of our business model drove the dividend increase of 24 percent that we announced in the quarter."

Recently rumours were flying that Texas Instruments was in talks with Amazon to flog its SoC business. While the firm didn't comment directly on the whispers, its statement listed what it views as its core businesses in the future, a list that did not include smartphones and tablets but did include embedded and analogue chips.

Despite Texas Instruments' impressive profits, the company will need to sort out its embedded division as it cannot continue to bank on cost cutting to keep increasing profits in the future. µ


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