Texas Instruments: For Sale, Division with No Future

From Texas Instruments' (TXN) Q308 conference call in October:

Let me start by describing the actions that we are taking to reduce expenses in our wireless business. The total savings will be about 1/3 of our current wireless investment or about $200 million on an annualized basis once the actions are complete. We will stop investing in merchant cellular baseband chip sets and are actively pursuing the sale of our merchant chip set product line…We will focus our wireless investments on our OMAP applications processors.

The Smartphone market is fast growing and TI is well positioned. Handset makers are focusing their own R&D activities on user interfaces and applications in order to maximize their product differentiation. From a semiconductor perspective… we will concentrate our wireless resources on OMAP and our intent on extending our lead in this market.

We want new capabilities that are going to be penetrating in. That’s where Smartphone leads to OMAP leads to connectivity.

I don’t think we’re going to find all this stuff ends up on a single device be it an application processor nor the temptation to have it integrate on to the baseband because basebands vary as you go throughout the world. Customers are going to want those platforms to be modular so they can adapt their product to different market places.

On TI’s Mid-Quarter Financial Update call, the company’s intention to divest of its merchant wireless business seems more urgent, but no progress was reported:

Q: Any update on the divestiture of the merchant wireless business?

A: I don’t really have a progress update for you on the sale of that at all.

Wireless is leading the decline both compared against normal seasonality as well as against what our initial expectations were back in October. But I would also say that all major product areas are weaker then we had expected back in October.

The problem is, who will buy the wireless handset business in this market? True it’s only been a few weeks since the first earnings call, so significant progress on a sale can’t be expected. But TI said on the earlier call that the handset business has no real future.

Q: In the past when this has happened, whether it’s DRAM or [CON] business or S&C, you’ve exited those businesses. I guess my question is why are you not exiting the entire wireless business?

A: When you look at the wireless business you want to get your R&D lined up on things that are going to grow. Things that are going to grow is a unit volume statement to where they’re going to grow actually at unit volumes far greater than the total handset growth. Handset market at $1.2 billion a year has only got certain growth capability left given the size of the planet and the number of subscribers.

Comments

[sharky:]

DELL should buy MOT

2008 Dec 11 08:17 PM