Texas Instruments Sees Growth in Analog, Wireless

Texas Instruments is still busy folding in its big acquisition of National Semiconductor, now called Silicon Valley Analog. But analysts came away from a California meeting with management this week, armed with new info on SVA and wireless, and expressing optimism.

Silicon Valley Analog (SVI) accounted for about 10% of third quarter 2011 sales for Texas Instruments (TXN), and the wireless business was about 9% of the quarter’s sales.

• Says J.P. Morgan Analyst Christopher Danely: Texas Instruments still has opportunities to expand its customer base, given the spare capacity it has in Silicon Valley Analog. Mobile power, signal processing and signal path are all areas with growth potential. The company is likely to continue gaining share in the analog market. Wireless “need not have come up during a day focused on National, but management recognized the interest. Design wins are up, dollar content is rising … TXN continues to be our top pick in semis and we reiterate our Overweight rating due to upside to consensus estimates throughout 2012.”
• Says Wedbush Analyst Betsy Van Hees: “We continue to recommend investors take advantage of pullbacks to build positions as we believe when macro headwinds clear, Texas Instruments will outgrow the industry driven by (1) Analog share gains, (2) increasing silicon content in mobile, and (3) synergies from the National acquisition.”
• Says Longbow Research Analyst JoAnne Feeney: “TI is off to a quicker start than most would have guessed. It is not letting SVA alone to run as its own division but [has identified] dozens of combinations of TI & SVA products useful for specific applications. And it may come as a surprise that they are already getting design wins. We see these moves as improving TI�s longer-term prospects, but the bigger picture of macro uncertainty and difficulty in timing the recovery leaves us at Neutral. Management offered no update on the quarter, nor on the situation in Thailand (none was expected). It will be providing its mid-quarter update on Thursday, December 8.”

The combined company would have generated revenue of $15.5 billion in 2010, and earnings per share of $2.91 excluding transaction costs. Analyst are now looking for flat revenue of around $14 billion this year and next, with 2012 earnings of around $2.30 per share.

When this reporter penned a piece on the stock in April for Barron’s magazine, shares of Texas Instruments were trading near $35 and bulls were looking for a� price closer to $42. The stock has declined about 10.5% since our the Barron’s piece, while the Standard & Poor’s 500 index is down about 7%, not including dividends. Over 12 months, TI is up 3% and the S&P 500 is up 5%.