* Looks to shift to broader market than smartphones
* Sees embedded processor growth slower but profitable
* Sees embedded/wireless gross margins 55-60 pct
* TI shares close down 3 pct
By Sinead Carew
Sept 25 Texas Instruments said it will
shift its wireless investment focus from products like
smartphones to a broader market including industrial clients
like carmakers where it is hoping for a more profitable and
But TI's shares fell more than 3 percent as investors
worried about its revenue prospects because the chipmaker did
not go into detail about how the change would affect its
financial results at an investor meeting on Tuesday.
Dallas, Texas-based TI has been under pressure in wireless,
where it has lost ground to rival Qualcomm Inc and the
world's biggest smartphone makers Apple Inc and Samsung
Electronics Co Ltd who have been developing their
own chips instead of buying them from a supplier like TI.
TI, whose chips are used in products such as Amazon.com's
Kindle Fire tablet, told investors that it would
continue to support its customers. But its mobile application
chip business, which supports features like video, will not
invest in supporting its customers future roadmap for tablets
and smartphones to the same degree as before.
"We believe that opportunity is less attractive as we go
forward," Greg Delagi, senior vice president for embedded
processing, said during a webcast of the meeting.
TI has already kicked off efforts to expand sales of its
OMAP wireless application chips beyond smartphone and tablets to
its embedded chip business, which include industrial customers
such as carmakers.
Analysts took Delagi's comments as the strongest indication
yet that TI might exit OMAP from smartphones and tablets
"TI made it very clear they no longer want to be in the
business of proving application processors for smartphones or
tablets," said Longbow Research analyst JoAnne Feeney. "What
remains uncertain is for how long they'll support customers."
As a result, investors were left wondering when TI's revenue
from smartphones and tablets would start to disappear and how
soon it would be able to replace it with new revenue generated
from applying its previous investments to new markets.
Delagi said that TI is "reprofiling" its investment in
wireless for embedded customers and that the company's research
and development profile for OMAP "needs to look different."
The executive said OMAP's growth in the embedded product
market will be slower than in the high-growth wireless market
but would "generate a more stable, profitable long-term
business" than wireless.
But he said it was too early to reveal specifics as to how
this would affect TI's financials as the company is still
working on changing its business.
In general Delagi said he expects TI's embedded processor
and wireless chips to generate gross margins in a range of 55
percent to 60 percent and operating margins of about 30 percent,
but he declined to give a time frame.
But this was not enough for investors.
"The market never likes uncertainty, and while removing some
they created more," RBC analyst Doug Freedman said.
TI shares closed down 3 percent at $27.83 on Nasdaq.