|Day's Range||3.80 - 6.39|
Texas Instruments (TXN) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
(Bloomberg) -- Analog Devices Inc. agreed to acquire rival Maxim Integrated Products Inc. for $20.9 billion in stock, heralding what may develop into a new round of consolidation in the $400 billion semiconductor industry.Analog Devices will pay 0.63 share for each Maxim share, representing a 22% premium to Maxim’s closing share price on Friday, the two companies said in a statement early Monday. Analog Devices shareholders will own about 69% of the combined company, which will be valued at about $68 billion including debt, the companies said.The acquisition of San Jose, California-based Maxim creates a larger rival for Texas Instruments Inc. in the market for analog and embedded processor chips, crucial components in the spread of computing and intelligence to everyday devices. Analog Devices shares slipped 4.3% to $119.16 at 11:36 a.m. in New York. Maxim was up 11% to $71.02.After a lull in such combinations caused by trade tension between China and the U.S. and regulatory holdups, Nvidia Corp. won approval for its acquisition of Mellanox Technologies Ltd. in the Asian country earlier this year, creating new confidence that deals such as the Maxim purchase can go ahead. Analog Devices Chief Executive Officer Vince Roach said he’s confident the transaction will close within a year.“The skills that we have are becoming increasingly scarce,” he said in an interview. “Now we have 10,000 engineers to point at a $60 billion opportunity. It brings us more scope.”Analog Devices also raised its revenue forecast for the current quarter to about $1.45 billion from an earlier target of about $1.32 billion. Profit will be about 91 cents a share compared with an earlier target of 72 cents.Acquisitions in general are starting to return after several quiet months while companies dealt with the fallout from the Covid-19 pandemic. The move by Analog Devices comes on the heels of Uber Inc. announcing a $2.65 billion deal for Postmates Inc., Allstate Corp. agreeing to a record $4 billion takeover of National General Holdings Corp. and Warren Buffett’s Berkshire Hathaway Inc. spending roughly the same amount on a gas pipeline and storage assets.Some chip deals have either been delayed or abandoned if they require approval in China, the world’s largest market for semiconductors. The U.S. is home to the biggest chunk of the world’s producers of the electronic components.Roach said he chose to go with a stock-based transaction rather than cash to reduce the possible impact of volatility in the market for his products caused by the pandemic. While he’s known his counterpart at Maxim, Tunc Doluca, for years, the two never met face-to-face during the negotiations.The transaction isn’t about cost cutting, Roach said. Maxim will give ADI more scope and abilities in markets such as automotive, communications - where it will add more fixed-line assets, and digital healthcare, he said.Analog Devices is currently less than half the size of market leader Texas Instruments by revenue. While Maxim wouldn’t allow it to close the gap totally, it would broaden the range of products in the analog portfolio, something that Texas Instruments has touted as helping to cement its dominance.All three companies specialize in analog and embedded computing components. Once a sleepy backwater of the industry, this segment has enjoyed a resurgence as the list of uses and customers has grown in recent years. Analog chips convert real-world things like sound and pressure into electronic signals, and the rush to add automation to factory equipment and buildings and to move cars toward a world where they won’t need human drivers has stirred new demand.It’s also a very profitable area of the chip industry. Analog Devices and Maxim have gross margins, or the percentage of sales remaining after deducting the cost of goods sold, in the region of 65%.Since 2015, the Philadelphia Stock Exchange Semiconductor Index has tripled in value. The benchmark index now has a market capitalization of more than $1.5 trillion. Over that same period, chip companies have been increasingly consolidating to help them lower costs and serve customers that have done the same. Their earnings have become more predictable and their cash generation has provided them with war chests and the ability to carry debt they couldn’t have sustained in the past.(Updates with CEO comments)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The boring part of the chip market is getting more interesting. For Texas Instruments Inc., that means stiffer competition from a stronger rival. Early Monday, Analog Devices Inc. announced a definitive agreement to acquire Maxim Integrated Products Inc. for about $21 billion in an all-stock deal that works out to a 22% premium to Maxim’s close on Friday. Maxim shareholders will get 0.63 share of Analog stock for each share they own, resulting in 31% ownership of the combined company. The transaction is expected to be completed in the summer of 2021 and is subject to regulatory and shareholder approvals.The deal would combine the No. 2 and No. 3 players in analog chips, one of the less sexy and more workaday corners of the semiconductor market. According to Bernstein, the category accounted for 13%, or about $54 billion, of the global $412 billion chip market last year. Analog chips have the specific function of converting physical world signal — including sound, temperature and pressure — into digital data. Compared to microprocessors — which are updated annually, cost up to hundreds of dollars per unit and require the latest bleeding-edge expensive chip manufacturing technologies — analog chips are very different. A typical analog product design can have a shelf life of many years, and they are inexpensive, often selling for less than a dollar each. And because they are also easier to make, they have high profit margins.But there are downsides for this segment of late. Analog-chip companies have faced growth challenges and have under-performed as a result. Shares of Texas Instruments, Analog and Maxim have risen less than 5% this year through July 10, versus a double-digit gain for the Philadelphia Semiconductor Index. The main problem is analog’s end markets are broad-based and account for the “nuts and bolts” basic chips used in all industry sectors – such as automotive and industrial. As such, they are beholden more to general economic trends. Wall Street analysts estimate fiscal 2020 sales declines of 14%, 12% and 7% for Texas Instruments, Analog and Maxim, respectively. In contrast, analysts forecast Nvidia Corp. – which makes digital chips for the surging growth applications of gaming, cloud-computing and artificial intelligence – will generate 33% revenue growth this year. Investors have taken note, bidding up Nvidia’s stock price roughly 80% this year.Given all that, it’s not surprising that a secondary player in the market such as Analog would feel compelled to do something to improve its fortunes. The classic consolidation playbook of expense savings will have to do. The company said it will be able generate $275 million of cost synergies by the end of the second year following the deal’s close, adding the merger will be accretive to earnings within 18 months.More importantly, ADI-Maxim would create a stronger No. 2 player in the “standard linear,” or non-customized, analog chip market behind Texas Instruments. The new merged company would get scale benefits to spread out its chip design expenditures to a larger revenue base, improving profitability. To illustrate the potential, Texas Instruments, which generates more than double the sales of its rival, spent just 11% of its revenue for research & development last year, versus 19% for Analog. Further, a combined company would have more pricing power with customers.On a financial basis a deal makes sense. What about the regulatory risk? Amid the heightened political environment surrounding the technology industry, there will be some antitrust scrutiny. But as the deal would make a No. 2 player stronger, versus adding to Texas Instrument’s pole position, and because the end consumer likely won’t directly see price hikes, approval from Western regulators shouldn’t be difficult. The main barrier could be China. If geopolitical tensions between the U.S. and Asian country escalate in the coming months, the approval process for U.S. corporate deals may get arduous.But except for that risk, shareholders in the two companies should rejoice over the prospect of this merger.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Analog Devices Inc. is close to an all-stock agreement to acquire Maxim Integrated Products Inc., according to people familiar with the matter.The semiconductor companies are talking about a deal that values San Jose, California-based Maxim at more than its current market capitalization of roughly $17 billion. Norwood, Mass.-based Analog has a market value of $46 billion and also has a large office in the San Jose area. The deal could be announced as early as Monday, though discussions could still fall apart, said the people, asking not to be named discussing private negotiations.Representatives for Analog Devices and Maxim declined to comment. The Wall Street Journal first reported the negotiations.Acquisitions are starting to return after a lull of several months caused by the Covid-19 pandemic. This comes on the heels of Uber Inc. announcing a $2.65 billion deal for Postmates Inc., Allstate Corp. agreeing to a record $4 billion takeover of National General Holdings Corp. and Warren Buffett’s Berkshire Hathaway Inc. spending roughly the same amount on a gas pipeline and storage assets.Some chip deals have either been delayed or abandoned if they require approval in China, the world’s largest market for semiconductors. The process has been complicated by the ongoing trade war between China and the U.S.Analog Devices is currently less than half the size of market leader Texas Instruments Inc. by revenue. While Maxim wouldn’t allow it to close the gap totally, it would broaden the range of products in the analog portfolio, something that Texas Instruments has touted as helping to cement its dominance.All three companies specialize in analog and embedded computing components. Once a sleepy backwater of the industry, this segment has enjoyed a resurgence as the list of uses and customers has grown in recent years. Analog chips convert real-world things like sound and pressure into electronic signals, and the rush to add automation to factory equipment and buildings and to move cars toward a world where they won’t need human drivers has stirred new demand.It’s also a very profitable area of the chip industry. Analog Devices and Maxim have gross margins, or the percentage of sales remaining after deducting the cost of goods sold, in the region of 65%.Since 2015, the Philadelphia Stock Exchange Semiconductor Index has tripled in value. The benchmark index now has a market capitalization of more than $1.5 trillion. Over that same period, chip companies have been increasingly consolidating to help them lower costs and serve customers that have done the same. Their earnings have become more predictable and their cash generation has provided them with war chests and the ability to carry debt they couldn’t have sustained in the past.(Updates with further details from fourth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Zacks Analyst Blog Highlights: Alphabet, AT&T, Philip Morris International, Amazon, Microsoft, Texas Instruments and United Parcel Service
The semiconductor space is a hot topic these days, and for good reason. While chip sales have tended to generally fluctuate with the economy, we are entering an age dominated by high-powered silicon. As the coronavirus has accelerated trends such as working from home, telemedicine, cloud computing, the Internet of Things, and the race to 5G infrastructure, leading-edge chips are powering the most resilient parts of the economy today.
Texas Instruments (TXN) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
(Bloomberg) -- Texas Instruments Inc. reported first-quarter revenue that beat analysts’ estimates, helped by customers stocking up on components to avoid potential supply disruptions caused by the Covid-19 pandemic. It also forecast sales that exceeded some Wall Street expectations.Chief Executive Officer Rich Templeton made a rare appearance on an earnings conference call to emphasize that the company will keep plants running and maintain spending on research and new production. The chipmaker also stuck to its pledge to return free cash flow to investors though share buybacks and dividends. The stock rose in extended trading.First-quarter net income fell to $1.17 billion, or $1.24 cents per share, from $1.22 billion, or $1.26 per share, from a year earlier. Revenue dropped 7% to $3.33 billion. That easily beat Wall Street expectations, according to data compiled by Bloomberg, although there was a wide range of forecasts.Texas Instruments said second-quarter earnings will be 64 cents to $1.04 a share, on revenue of $2.61 billion to $3.19 billion. On average, analysts predicted profit of 93 cents and sales of $3.1 billion. One analyst was looking for revenue to be as low as $2.5 billion.“With a COVID-19 recession likely upon us, and with reduced visibility of customer demand, we are using the 2008 financial crisis to model our second quarter outlook,” the company said. “To reflect the increased uncertainty, we have expanded the range of our guidance.”Texas Instruments is the first major U.S. chipmaker to report results following the lockdown of the much of the population in an attempt to contain the spread of the virus. The company’s semiconductors are in everything from dishwashers to satellites, making the business an important indicator of demand across the economy.Executives said they’re seeing short-term demand from customers building chip inventories. When that’s complete, the company expects demand to fall, and it is predicting orders will decline in May.The chipmaker is nonetheless determined to keep production running and build its own stockpile to make sure it can satisfy any snap-back in demand that happens once the pandemic has passed.“Many customers are still processing what’s happening,” said Chief Financial Officer Rafael Lizardi on the conference call. “This thing could go multiple ways in the second quarter and the third.”Under Templeton, the chipmaker has bet on expanded use of electronics in vehicles and industrial systems. Car sales have plummeted during the pandemic and production has halted at many different factories.“Automotive, industrial and consumer are the end markets most impacted by the pandemic,” Susquehanna Investment Group analyst Christopher Rolland wrote in a research note before Tuesday’s results. He cited predictions that vehicle sales will decline 11% this year and noted that economic indicators related to manufacturing are at the lowest levels since the financial crisis in 2009.Texas Instruments shares rose 2% in extended trading after closing at $106.84 in New York. The stock is down 17% this year, a steeper decline than the Philadelphia Stock Exchange Semiconductor Index. The shares have surged in the past six years, partly based on stock buybacks and dividends.“Our objective is to return all free cash flow to the owners of the company,” Lizardi said on Tuesday.(Updates with executive comments throughout)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Investing.com - Texas Instruments (NASDAQ:TXN) reported on Tuesday first-quarter earnings that beat analysts' forecasts and revenue that topped expectations.
Could Texas Instruments Incorporated (NASDAQ:TXN) be an attractive dividend share to own for the long haul? Investors...
(Bloomberg) -- Broadcom Inc. warned customers they’ll need to place orders for parts at least six months ahead of time, a surprisingly long lead time that points to wider than anticipated disruptions to the tech industry’s global supply chain.Lockdowns in Malaysia, Thailand, Singapore and the Philippines are “closing or severely restricting business operations,” according to a letter to customers from Nilesh Mistry, Broadcom’s vice president of sales, dated April 13 and seen by Bloomberg News. He urged clients to put in their orders at least 26 weeks ahead of delivery -- meaning anything ordered now will get shipped right around the crucial holiday season. The typical lead time for deliveries is about two to three months.The missive from Broadcom -- which makes crucial components for Apple Inc.’s iPhone -- drives home concerns that Covid-19 is disrupting the tech supply chain well beyond China, where the novel coronavirus first emerged to impact global production lines. While China’s recovering its footing, lockdowns and quarantine orders in crucial regions such as Southeast Asia are exerting a still-unknown impact on the supply of everything from Nintendo Switches to smartphones.“Air and sea transport options have become unreliable and become more expensive and have increased delays,” Mistry wrote. His letter to customers didn’t specify which products are experiencing delayed shipments and what Broadcom’s normal lead time is between orders and delivery. “We hope that as the global community finds better methods to address the Covid-19 pandemic, the conditions will abate and we will be able to resume our normal operations.”The San Jose, California-based company declined to comment.Not Made in China Is Global Tech’s Next Big Trend: Supply LinesTerry Gou, whose Hon Hai Precision Industry Co. makes many of the world’s most recognizable consumer electronics including the iPhone, said in March China’s production restart had proven faster than expected. But he was worried that disruptions outside of China could become an issue as the coronavirus spreads globally.Broadcom is part of the same supply chain that most of the world’s chipmakers use to outsource production, testing and packaging of their products. It’s a critical link for products from mobile phones to data-center hardware. Any delays in the delivery of its semiconductors could spread throughout that supply network, potentially leading to missed launches of some of the world’s most high-profile and widely used electronic devices.Intel Corp. and Texas Instruments Inc. will report earnings next week, when they’re certain to face questions from investors about their ability to keep their factories running and fill customer orders. Products from companies such as Qualcomm Inc., Nvidia Corp. and Advanced Micro Devices Inc. are built mostly by Taiwan Semiconductor Manufacturing Co., then tested and packaged by other companies in China and Southeast Asia. Some companies perform elements of the process in-house, and a shrinking group are capable of doing all the steps themselves.Wireless customers include Apple and Samsung Electronics Co., which use Broadcom chips to add Wi-Fi and other connectivity to some of the world’s best-selling smartphones. In networking, Broadcom’s switch chips are the market leaders, going into machinery that’s used by all of the biggest equipment makers, including Cisco Systems Inc. and Huawei Technologies Co., and companies such as Amazon.com Inc. that build their own gear.Read more: Nintendo Is Likely to Suffer Global Switch Shortages From VirusOn March 12, Broadcom withdrew its annual sales forecast and gave weak near-term guidance, citing the impact of the pandemic. Chief Executive Officer Hock Tan told investors that, while fundamental demand was still strong and he hadn’t see any negative impact in the first quarter of the year, “visibility was lacking.”As part of a bond offering last week, Broadcom warned investors it was experiencing some disruption to parts of its global supply chain. In the “related risks” section of a regulatory filing, the company highlighted that a main warehouse and a number of assembly and test subcontractors are in Malaysia, which has shut down all non-essential businesses. The warehouse is fully operational, but “many of the facilities of our suppliers and service providers are not,” the company said at the time.“An extended closure of these facilities may require us to move assembly and test services to providers in other countries, and may, eventually, lead to a shortage of some components needed for our products,” Broadcom said. “In the event restrictive measures in Malaysia are intensified and our warehouse is shut down or required to operate at a reduced capacity, our ability to deliver product to our customers would be severely limited.”The test and assembly of chips includes coating them in protective plastic, adding electrical contacts that let them communicate with the rest of the device, and making sure they function. Such work is less expensive and easier to conduct than the processing of silicon wafers that make up the fundamental circuits of the chips. Much of the packaging work was shifted to countries with lower labor costs decades ago.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.