Wednesday, September 10, 2008

Texas Instruments (NYSE:TXN): Increasingly Missing Out on 3G Baseband Cycle - Baird

Baird has some harsh words for Texas Instruments (NYSE:TXN) noting that while reiterating the midpoint of its 3Q revenue/EPS guidances, they expect TI to lose 30-40% market share in low-end Nokia phones against Infineon, which they believe starts ramping within the next few months. Also, TI acknowledged it no longer expects 3G baseband wins to ramp at EMP in 2H09. Net, the firm believes TI is increasingly missing out on the 3G baseband cycle, while OEMs increasingly migrate to merchant solutions. Neutral rating.

TI does not have yet a 3G merchant solution, per Baird's checks. TI highlighted on the call yesterday a shift by mobile phone OEMs to merchant baseband solutions as they emphasize spending on software, applications, and user interface. Firm believes the ongoing shift to 3G merchant solutions will lead TI to lose further market share in 3G in 2009.

Firm expects a continuation of below-seasonal trends in wireless in 4Q, as their checks indicate slight order reductions late 3Q from tier-one mobile phone OEMs primarily impacting high-end phones (versus weakness primarily in low-end phones this 3Q).

They view is that TI's under-investments in 3G architecture development two yearsago are now leading the company to increasingly miss on the 3G baseband cycle, while 3G-based mobile phones are now ramping aggressively. TI's 3G baseband footprint will be mostly limited to Nokia, and possibly to Motorola, in 2009.

Notablecalls: Note that most other firms are positive on TXN this morning following guidance reit last night.

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