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Texas Instruments (TXN)

Updated as of Feb. 22, 2000

TI - Suggested position - own the stock

5 yr Revenue Growth -4.6% (CAGR)
5 yr Earnings Growth 9.0% (CAGR)
PS (Sales/Share / Price) ~13.2
PE  ~89
EPS TTM $1.68

Stock Price 

1/14/2000 $110.875
2/2/2000 $119.375
2/22/2000 $149.00
My estimated price per share. $120 to 140

Results over the past 3 years

$M

12/31/97 12/31/98 12/31/99 Growth Rate (97 to 99)
Revenue 9,750 8,460 9,468 -1.5%
Net Earnings 302 407 1,406 215%
Margins 3.1% 4.8% 14.9%  


Business Outlook:
 Texas Instruments is now focused on high growth markets and is a leader in supplying chips for these markets. This should result in TI's revenue and earnings growth rates rapidly growing. TI is a company that has been continually redefining itself in the semiconductor industry over the past years. Currently TI is a couple years into transforming itself into a business tightly focus on Digital Signal Processing (DSP) chips and analog chips. TI sells the key chips that are used to build wireless phones, DSL modems, consumer devices, hard disk controllers and they have business units focused on education (calculators) as well as projector display units. TI is the largest maker of DSP chips.

The DSP market is estimated to be growing by 25% per year according to Forward Concepts. Dataquest is estimated that analog chips are also growing at 16% a year. The wireless phone market is estimated to be growing at about a 70% growth rate by industry sources and the major limits be faced is shortages of components.

In 1998 TI shipped 100 million DSPs into the wireless markets. TI is expecting that digital wireless phones will grow from 153 million (1998) to 230 million (1999). Wireless phones are consumable product category and it seems that many people replace their wireless phone every 2 or 3 years as they change services or get a phone with the latest features. TI management believes they are gaining market share in the DSP business.

2/22/2000 - TI introduced two new DSPs. They added a new chip, the C64 to the flagship C6x family. This chip is 10 times faster than the C62 (introduced in 1997). They also introduced a new member of the C5x family, the C55. This chip consumes 6 times less power per unit of processing power, than its predecessor. Battery powered devices using this chip will be able to operate longer than previous chip technologies would have allowed. The new chips are software compatible with previous family members, which will help users design them into new products. The C64 is expected to be widely used in wireless phones and the C55 is expected to be designed into consumer portable audio products like MP3 players.

Sales of DSP chips for consumer devices (e.g. MP3 players, cameras, broadband modems) grew by 37% in the last quarter. In 2000 TI is planning to spend some $2B to upgrade and expand its chip manufacturing capabilities.

Competitors:  Analog Devices (ADI) and lots of other network chip manufactures

My Position: I own the stock


Disclaimer: These notes are not investment advise or recommendations. From time to time I invest in the companies I write about. At any time, I maybe buying, selling or holding these stocks. I share my thoughts on companies to help other investors improve their decision making. These writings are starting point for you to make your own independent decisions and are not intended to be a replacement for your own decision making. I welcome your feedback suggestions and advise. Good luck on your investing.
 

Copyright 2000 John Giudice, All Rights Reserved