Texas Instruments, Inc. (TXN)

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The Company is engaged in the manufacturing, designing or selling operations in more than 25 countries. The two separate business segments are Semiconductor and Education Technology.

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Avatar NetscribeSemiCdr (62.71) Submitted: 1/19/07 8:29 AM : Start Price: $28.20 TXN Score: 8.70

Texas Instruments is a well-diversified semi conductor company; with end market exposure spread across the wireless, broadband, consumer electronics, PC peripheral and industrial sectors. TI has over 35,000 employees worldwide, and serves more than 30,000 direct and indirect customers.

Top-tier handset manufacturers such as Nokia and Motorola make wireless handset market a critical growth factor for 2007. Nokia with its GSM and WCDMA handsets remains a key customer accounting for 10% of Texas’s total sales. Nokia also proves to be a strategic asset for the company as Motorola has started sourcing from, its competitor Qualcomm. The company sees huge potential for its LoCosto and eCosto platforms to penetrate the high-volume market of low-end handsets with estimates of selling 1 billion units in 2007.

Texas Instruments sees huge potential in its Digital Signal Processing (DSP) markets worldwide. Semiconductor content in the automotive industry is expected to double by 2015 with hopes of garnering market share with its DSPs, analog, and microcontroller products for a variety of automotive applications such as telemetrics, safety systems and powertrain.

Texas Instruments has a solid Intellectual property and patent portfolio across the wireless industry for which it has poured in $1,639 million in research and development over the past three quarters. A lot of onus rest on Texas Instruments, to monetize its patent portfolio apart from fighting against the alleged unfair business practices by Qualcomm in the European Union. The company’s responsive manufacturing model of fully utilizing its inbuilt internal capacity and outsourcing about 20% helps in reducing capital expenditures and price fluctuations to meet customer demands. On the operations front the distributors inventory levels remain lean and is tightening the screw on expenses. The rosy fundamentals confirm its tag of being under-valued among its peers in the semi conductor industry makes is a worthy pick.

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Avatar NetscribeSemiCdr (62.71) Submitted: 5/25/07 8:37 AM

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Though revenues declined for the recently concluded first quarter, it marked a significant milestone with the gross margins and operating margins increasing more than 50% and 20% respectively. This reflects the efficiency of the manufacturing operations along with the enhanced quality of its product portfolio and the role played by the highly differentiated analog products. The hybrid version of the “fab less” strategy whereby only a portion of manufacturing being outsourced has helped during inventory correction or orders dropping in the slack season and worthy to keep production in-house.

Significant opportunities are seen in the wireless market with the design win of Motorola to jointly create customized 3G solutions, which it considers very strategic. Currently it derives around 13% of revenues from the fragmented analog space with hope of increasing its share in the revenue mix. Texas Instruments owes its success to first mover advantages; switch costs, huge research and development expenses that had helped it attain leadership position in digital signal processors (DSP).

Significant investments by organic means and well as on the acquisition front have helped it strengthen its capability in the entire signal chain of the analog market. It has set a goal of growing its revenues at a faster rate than the DSP and analog markets where it is a market leader. Moreover it has set another goal of growing its EPS at a higher rate than revenues through improved margins for which it also adopted share repurchase as a means that would use capital efficiently. Though analog and DSP seems very strategic it looks upon imaging controllers as bright spots to cash on. With early signs of demand rebounding the stock looks well positioned for better sales considering it a safe bet for the current year.

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Texas Instruments, Inc. (TXN)

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