NEW YORK (Reuters) - Texas Instruments Inc forecast that fourth-quarter earnings and revenue would fall far short of Wall Street expectations, blaming the economy for weak orders across all its wireless and analog chip businesses.
Shares of TI fell more than 5 percent on the news, as the company also announced it was in talks to sell part of its business of making wireless baseband chips, which are the brains of mobile phones.
TI said it would sell its merchant wireless chip business, which are off-the-shelf chips that it makes for clients such as Motorola Inc
"Guidance is worse than expected. Selling just their merchant wireless business is less than people expected," said American Technology Research analyst Doug Freedman, noting that investors would have preferred TI to sell its entire baseband chip unit.
TI, which makes chips for everything from cell phones to industrial equipment, has been losing wireless business to rivals such as Qualcomm Inc
It forecast fourth-quarter revenue of $2.83 billion to $3.07 billion, below the average analyst forecast of $3.33 billion.
TI forecast fourth-quarter earnings per share of 30 cents to 36 cents, whereas analysts were expecting 43 cents, but it was not immediately clear if the numbers were comparable as TI's forecast included a tax benefit.
"It's gonna be about a 9-month hurdle for them to see a rebound at this point," said Charter Equity Research analyst John Dryden. "They're the No. 1 player in the analog business by a large margin, but they're seeing a pullback in orders from both corporate and consumer customers."
The company posted a third-quarter profit of $563 million, or 43 cents a share, down from $776 million, or 54 cents per share, in the year-ago quarter. Revenue fell about 7 percent to $3.39 billion.
Analysts on average had expected earnings of 44 cents a share on revenue of $3.395 billion, according to Reuters Estimates.
TI Chief Financial Officer Kevin March told Reuters that orders had worsened throughout the third quarter, and were expected to decline further in the fourth quarter.
"It's very broad-based," he said of the downturn. "We're expecting the quarter's going to be down quite a bit. It's a reflection that the order trend has progressively gotten worse."
March said profit in the third quarter was hurt by TI reducing inventories, which meant that its factories were producing less while it still had to pay fixed costs.
He said TI would double inventory reductions from the third quarter to about $150 million worth of products in the fourth quarter.
TI has seen its shares fall 37 percent since July. Its shares closed up 33 cents at $17.98 on the New York Stock Exchange on Monday, but fell to $17.05 in after-hours trading following the earnings report.
(Additional reporting by John Tilak, editing by Richard Chang)
