Texas Instruments (NYSE: TXN) has roped a
powerful bull and is
riding that longhorntill the cows come home. The company
is surprising itself with unexpectedly strong results
at every turn along the way.
Citing tailwinds like tight expense controls and high
demand for Texas Instruments' (TI) analog chips, the company
reported $0.42 of earnings per share on sales of $2.88
billion. In each case, TI stormed past the highest end of its
already optimistic guidanceand closed the gap to 2008's
pre-meltdown results by a fair bit. On the bottom line, TI
came in just a penny short of the year-ago quarter's $0.43 of
earnings per share.
We're looking at roughly equal profits dripping down from
15% lower sales. That dichotomy is a sure sign of operational
efficiencies that TI didn't have last year. One more quarter
like this one will bring TI's sales close to where they were
before the Great Panic -- and if TI can keep its operational
belt tight, that should translate into much higher profits.
The operating margin saw a healthy increase of 22% last year
to 26.5% this time around. Perhaps even more impressively, TI
nearly doubled operating margin from last quarter.
And TI isn't even done improving its cost structure yet.
The company bought cutting-edge chip manufacturing equipment
for pennies on the dollar in memory maker
Qimonda' s
bankruptcy saleand will use that low-cost investment to
produce more and cheaper analog chips in 2010. TI is slowly
leaving the low-margin wireless baseband sectorto
competitors like
Analog Devices (NYSE: ADI) and
Broadcom (Nasdaq: BRCM) to refocus on the
more profitable signal conversion and logic sectors.
 In the high-growth mobile field,
Qualcomm (Nasdaq: QCOM) is pushing out its
brand-new high-end
SnapDragonmobile processor to smartphone makers, while
Marvell (Nasdaq: MRVL) and
NVIDIA (Nasdaq: NVDA) are
trying to claim a spotin this profitable rodeo.
But TI's OMAP processor is already in the ring, inside
the fanciest new phone
Verizon (NYSE: VZ) can muster. TI is joining
this race in a strong position, and is nearly back to
business as usual. And business is good in Texas.
This article was originally published as
Where Does TI Go From Here? Up, Of Courseon
Fool.com
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