TEXAS INSTRUMENTS INCORPORATED 
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By Sinead Carew
But shares of the maker of wireless and analog chips rose 5 percent in after-hours trading on Monday as analysts said the better-than-expected fourth quarter and the cost-cutting measures meant TI could be positioned for growth when demand recovers.
"The hope is that we'll start to find the bottom at these levels. That, along with expense reductions, will create a greater flow through to the bottom line when revenue starts to recover," said Collins Stewart analyst Ashok Kumar.
TI said it was cutting its workforce by 3,400 to reduce costs, which American Technology Research analyst Doug Freeman said would "signal a recovery in earnings even if demand levels don't improve."
The company warned that it still had tough times ahead, forecasting a possible loss for the first quarter, when utilization of its factories was expected to fall below 35 percent from 48 percent in the fourth quarter. It said it expected to idle many factories for several weeks in March.
Chief Financial Officer Kevin March told Reuters in an interview that the company had no sense of how soon demand would recover as virtually all its customers in all regions and product segments were cutting orders.
"We left the quarter with a very low level of backlog, which gives us considerably less visibility than normal ... We're preparing for what could be an extended down period in the economy," March said. "We can barely see out one quarter."
The report follows a worse-than-expected fall in profit at TI's biggest client, Nokia
For the current quarter, TI saw a loss of 11 cents to a profit of 3 cents per share, including a 3 cent restructuring charge. Analysts had forecast a profit of 3 cents per share excluding the charge, according to Reuters Estimates.
TI saw revenue falling to between $1.62 billion and $2.12 billion in the first quarter, whereas analysts' average estimate was $2.04 billion, according to Reuters Estimates.
WIRELESS WEAKEST
March said that while business was weak across the board with total orders down 42 percent, wireless was the weakest with revenue down 29 percent sequentially compared with a typical fourth-quarter decline of about 3 percent.
TI executives said the company had stopped trying to sell its merchant business, which makes off-the-shelf chips, after talking to potential buyers. Instead, it would shut most of its internal efforts for the unit and only support existing customers with minimal staffing.
"As we progressed, it became clear to us that a sale would not achieve the same value that we will accomplish by retaining this operation and reducing the investment levels to the minimal required," Ron Slaymaker, head of investor relations for the company, said on a call with analysts.
TI said it expects annual savings of about $700 million from cost cuts, including scaling down the merchant chip business and the workforce reduction, which includes 1,800 layoffs and 1,600 voluntary departures.
March said on the conference call that he expects both the U.S. economy and global economy to decline this year.
He said the company would continue to aggressively drive down inventory in the first quarter. "I suspect we'll look back on this and say its the worst downturn we've seen," he said.
Net profit was $107 million, or 7 cents a share, in the December quarter, compared with $756 million, or 54 cents a share, a year ago. It said that the latest quarter included restructuring charges of 13 cents per share.
Excluding special charges, profit was 21 cents a share, better than the 12 cents forecast by Wall Street, according to Reuters Estimates.
Fourth quarter revenue fell to $2.49 billion from $3.56 billion, but better than Wall Street expectations of $2.37 billion.
Shares of TI rose 4.9 percent to $15.50 following the results, after closing down 1.47 percent at $14.77 on the New York Stock Exchange. The stock remains down 53 percent from a 12-month high of $33.00 in May 2008.
(Writing by Tiffany Wu; Editing by Matthew Lewis)
