Texas Instruments warns of even greater fall in revenues

Texas Instruments is warning that first-quarter revenues will decline by about 20%, compared with its previous prediction of a fall of around 10%.

It says the downward revision in its expectations is due to the economic slowdown that is continuing to constrain demand for technology products.

The company initially experienced a sharp downturn in its markets late in the fourth quarter of 2000 as its customers reacted to weakening demand and higher inventories.

Texas Instruments says market conditions have not improved during the current quarter and customers have continued to cancel or reschedule backlog, causing 'visibility' to remain limited.

Due to the additional drop in revenue, pro forma operating margin is expected to decline by between 6% and 8%, instead of the earlier estimate of between 5% and 6%.

Early in the quarter, Texas Instruments began a phased cost reduction plan to limit the impact of reduced revenue on profitability. Actions include temporarily shutting down factories and introducing shorter working weeks in some areas.

The company has put a temporary freeze on hiring and has significantly cut discretionary expenses, such as travel.

In today's statement, TI says is is launching a voluntary retirement programme and has lowered its capital spending plans for 2001 to $2 bn, a 30% reduction compared with last year's sum of $2.8bn.

TI says it is continuing its strong research and development investments, estimated to be $1.7 bn for 2001, up from $1.6 bn last year.

Tom Engibous, the company's chairman, president and chief executive, says: "The strength of our balance sheet gives TI the ability to maintain strategic levels of capital and R&D investments."