(Bloomberg) -- Texas Instruments Inc. Chief Executive Officer Haviv Ilan said that customers are working through excess inventory and the timing is right for an order recovery following eight straight quarters of revenue declines.
Speaking on a conference call after delivering third-quarter results, Ilan said that three of TI’s main markets have already begun to rebound, but its biggest sales sources — industrial and automotive chips — are still suffering from a glut of inventory.
“We really need the broad industrial market and the automotive market to join,” he said. When asked to predict a rebound he replied, “It’s about time, but we haven’t seen it yet.”
Investors seized on the optimistic tone and sent the shares up about 3% in late trading. The stock had been down after Texas Instruments posted its results, which included a tepid forecast for the fourth quarter.
Sales in that period will be $3.7 billion to $4 billion, the company said. Analysts, on average, estimated $4.08 billion, according to data compiled by Bloomberg. Profit will be $1.07 to $1.29 a share, compared with an average projection of $1.35.
The Dallas-based company is the biggest maker of chips that perform simple but vital functions in a wide range of electronic devices. While the chipmaker’s executives are typically reluctant to give industrywide long-term projections, investors use its forecasts as indicators of demand across the industry.
Texas Instruments shares, up 14% this year, closed at $193.97 on Tuesday.
In the third quarter, revenue fell 8.4% to $4.15 billion, marking the eighth consecutive contraction. Analysts projected $4.12 billion. Profit was $1.47 a share, compared with an estimate of $1.37 per share.
Heading into Texas Instruments earnings, chip companies had been giving conflicting signals about the industry. Equipment maker ASML Holding NV reported weak orders for its gear and said customers are becoming more cautious. Taiwan Semiconductor Manufacturing Co., meanwhile, delivered a strong forecast. For both companies, demand for advanced chips used in artificial intelligence computing is a bright spot.
The biggest chunk of Texas Instruments’ revenue comes from makers of industrial equipment and vehicles, which together account for more than 70% of sales. Its products provide a variety of functions — some as simple as registering button pushes and converting power.
While that type of component needs less sophisticated manufacturing than the processors that run computers and phones, the addition of new electronic features to everyday devices has made Texas Instruments’ products more valuable.
The company is spending heavily on new plants — part of an effort to bring most production back in-house — and that’s weighing on profit in the meantime. Texas Instruments has said the effort, when complete, will give it a cost advantage over rivals.
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