In an earlier post, we looked at the Apple (NASDAQ:AAPL) iPhone’s components where I had mentioned that Texas Instruments could possibly be providing the power management device. This mystery has still not been solved but Texas Instruments looks to be the best bet.
Texas Instruments Incorporated (NYSE:TI) (NYSE: TXN) with revenues of $14.25 billion and $7.26 billion gross profit in 2006 is the world’s third largest semiconductor company. Based in Dallas, it has 31,000 employees in more than 25 countries.
The company has two primary business divisions: Semiconductor and Education Technology. The Semiconductor division, with core products lines of analog semiconductors and Digital Signal Processors [DSPs], is the breadwinner for TI bringing in more than 90% of revenue. It had another division, Sensors & Control that it sold minus the radio frequency identification [RFID] systems operations to an affiliate of Bain Capital, LLC, for $3 billion in April, 2006. Earlier in 2006, it acquired Chipcon Group ASA, a leading company that designs short-range, low-power wireless radio frequency [RF] transceivers for $183 million.
For the first quarter of 2007, TI reported revenues of $3.19 billion, a year-over-year decline of 4% and EPS at $0.35, a decline of $0.10 from the fourth quarter of 2006. This decline in revenue was mainly due to an inventory correction in the semiconductor market and decrease in demand for DSP products. For the Semiconductor division, revenue was $3.12 billion, a decline of 8% from the previous quarter and a 4% decline compared with first quarter 2006.
In January 2007, TI decided to change it manufacturing strategy to save costs of up to $200 million. It decided to work with its foundry partners to develop its digital process technology. It would also be shutting down an older digital factory and shifting its equipment to its analog factories.
Whether TI supplies the power management chip for the iPhone or not, it definitely stands to gain from its launch. On July 3rd, following its launch, shares of TI gained 43 cents, or 1.1 percent, to $38.06. It is currently trading at $38.99.
As I said earlier, it is a great company with deep, deep technology, and a long tradition of innovation. It goes without saying that it has the goods to meet the increased demand for advanced low-power chips caused by the launch of the iPhone, and the increasing trend towards hyper-integration. The combination of extreme miniaturization, hyper-integration, and the low-power needs of these miniaturized chips is a formidable technical challenge. TI is one of the few companies that have enough technology horse-power to pull this off.
TI 1-yr chart: