TI view disappoints, cites caution across markets

By Sinead Carew

NEW YORK (Reuters) - Microchip maker Texas Instruments Inc said quarterly profit rose but forecast results below Wall Street estimates, citing caution among a broad customer base as well as weak demand for high-end cell phones.

TI shares fell 2.5 percent in extended trade after the company also said on Monday its second quarter would be weaker than expected due to an uncertain economic situation.

Analysts believed the order weakness was mainly in wireless even though TI did not say how much was in the rest of its business, which includes analog chips used in various markets including consumer electronics and industrial products.

"We're just responding to our customers' conservatism. They're managing their inventory very tight," Chief Financial Officer Kevin March said in an interview with Reuters. TI cited inventory levels that would take about two weeks longer to clear than in the same quarter a year ago.

While March said guidance was conservative across the board, he said demand for third-generation phones with fast Web links in particular would grow more slowly than anticipated.

"Demand will probably increase over time, but at a more delayed pace than customers might have previously expected," March said, referring to the advanced 3G phones, which include as many as four times more TI chips than more basic phones.

Qualcomm Inc, TI's main rival in wireless chips and a big player in 3G, is set to post results on Wednesday, a day after smaller rival Broadcom Corp reports.

"I would attribute it to wireless despite the company's talk of a conservative outlook for the broad market," said Charter Equity Research analyst John Dryden, who estimated that about half of TI's analog business relates to cell phones.