TI CFO: Economy No Real Cause For Concern

James Rogers

DALLAS (TheStreet) -- Texas Instruments(:TXN) Chief Financial Officer Kevin March says that investors should not be overly concerned about the uncertain macroeconomic environment, which weighed on the company's second-quarter results this week.

"Concern, I think, is too strong a word," he told TheStreet, during an interview. "What we have is an economy that's growing, both domestically and internationally, but that's growing at a slower pace than most people would prefer to see at this stage in the cycle."

The CFO acknowledged the European headwinds identified by other tech heavyweights such as Intel(:INTC), as well as a slight slowdown in China, but warned investors not to panic.

"It's not like we're heading for a global decline or anything," he said. "I think that the important thing is that we're still growing, and we're likely to grow."

March explained that Texas Instruments' revenue grew 7% between the first and second quarters. "For revenue patterns, our low point was in the first quarter," said the CFO, who called a bottom in the IT spending slowdown earlier this year.

Texas Instruments' second-quarter profit topped both its own and Wall Street's expectations after market close on Monday. Investors, however, focused on the company's weak guidance, pushing its stock down less than 1% to $26.61 in afternoon trades.

The chip maker noted its customers are cautious about placing new orders.

"Based on our analysis, customers are holding very lean levels of inventory," said March. "They have given us normal visibility for July and August, but the visibility in September is less than they would normally give us."

The CFO explained that this may be the result of low end demand or the fact that Texas Instruments can quickly meet customer requirements.

"We have built up our inventory a fair amount over the last three quarters or so," he said. "The lead time on most of our products is six weeks or less - typically, we target in the six to eight weeks kind of range."

Analysts, however, feel that Texas Instruments faces an uphill struggle during the coming months.

"Growth is likely to remain slow in the back half of the year due to alack of seasonality for PCs and handsets, exacerbated by inventory growth foranalog ICs Integrated Circuits in the Asian distribution channel exiting Q2," explained Canaccord Genuity analyst Bobby Burleson, in a note released on Thursday.

Burleson, who has a hold rating on Texas Instruments, lowered his 12-month price target to $28 from $32 on the stock.

Nomura Equity Research, which has a neutral rating on TI, also cut its price target, going to $30 from $32. Texas Instruments' third-quarter outlook is worse than peers such as Intel and logic chip maker Xilinx(:XLNX), according to Nomura analyst Romit Shah.

--Written by James Rogers in New York.

Follow @jamesjrogers

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