Shares of chip maker Texas Instruments Inc. (NYSE: TXN) have been falling this morning after the company cut its first-quarter sales and earnings outlook last night. Texas Instruments blamed one of its key customers as it decided to slash orders. The only clue about this mysterious customer, whose name wasn't disclosed by the company, was that is a maker of wireless phones. Texas Instruments now expects first-quarter earning in a range between 41 cents and 45 cents per share, which is below analysts' predictions for quarterly profit of 46 cents per share. The company had previously predicted earnings of 43 cents to 49 cents.
Looking at revenue, the company forecast sales in a range between $3.21 billion and $3.35 billion, compared with its previous range of $3.27 billion to $3.55 billion. Its predictions were again below analysts' estimates of $3.40 billion, according to Thomson Financial.
Texas Instruments's fears over its future earnings are easily justified. Last year, two of its major wireless customers, Nokia Corp. (NYSE: NOK) and Sony Ericsson (NASDAQ: ERIC) announced they would begin ordering chips used in their phones from another suppliers.
During 2007, the chip maker's stock price declined as the slumping housing market and credit crisis put a curb on consumer spending on mobile phones and other electronics. Now, after a difficult past year, the stock is taking another hit after yesterday's announcement.
One analyst at Piper Jaffray, Amit Kapur, expressed his concerns over the slowdown in the company's handsets demand and downgraded the stock this morning to Neutral from Buy. Texas Instruments' price target was also lowered from $36 to $30.
With the current worries over the U.S. economy we can't know for sure how chip demand will regress for the company. However, for now, Wall Street is agreeing with Kapur, pushing shares of the stock down nearly 4% in morning trading.
Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.
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