Texas Instruments Inc.'s second-quarter profit beat Wall Street expectations but the company warned that its third-quarter revenue would be weaker than usual for this time of year as customers are cautious due to global economic uncertainties.
Shares of TI, which makes chips for a wide range of products such as cellphones and industrial equipment, fell 1 per cent in extended trade after the news.
TI said Monday that orders started to weaken in June and that its backlog for shipments due in September is also lighter than expected.
Company executives said TI's customers and distributors are "increasingly cautious in placing new orders" because of the global economic environment even though they have low stockpiles of chips from the company.
Bernstein analyst Stacy Rasgon said the order slowdown is "not hugely surprising" as TI is the latest in a long line of chip companies including Intel Corp and Qualcomm Inc. to lower financial targets this quarter.
Mr. Rasgon said TI is perhaps being a little cautious about September as it had said that "order patterns for July and August (were) fairly normal."
TI forecast third quarter revenue of $3.21-billion to $3.47-billion, implying a midpoint that is flat with its second quarter revenue. This compares with TI's 5-year average for third quarter sequential growth of 6 per cent.
Chief Financial Officer Kevin March said it was not clear whether customers were anticipating a slowdown in their own business or taking advantage of TI's ability to deliver chips relatively quickly because it has high inventory levels.
"It's a little different to draw a concrete conclusion but what we do know is that it's unusual," Mr. March said.
"As we look at our customers our opinion is that their inventories are very lean. That tells us that if in fact we've normal seasonal demand, it's a good thing we've built a lot of inventory," he said.
TI reported earnings of $446-million, or 38 cents per share, down from $672-million, or 56 cents per share, in the year-ago quarter. Excluding certain items, it earned 44 cents per share, above Wall Street expectations for 41 cents according to Thomson Reuters I/B/E/S.
Revenue fell to $3.34-billion from $3.46-billion, compared with analysts' average expectation for $3.35-billion according to Thomson Reuters I/B/E/S.
TI shares fell to $26.60 after closing at $26.82 on Nasdaq. The stock had already fallen about 16 per cent since the company's last quarterly report on April 23 as investors worried about slowing chip demand.