Atheros and Texas Instruments - Chips Ahoy

Atheros (Nasdaq:ATHR) and Texas Instruments (NYSE:TXN) are indeed very different kinds of chip companies, but there are basically in the same boat today. The big rebound in chip demand is over, demand and supply are basically back in alignment and investors are probably looking at a couple quarters of uninspiring performance before growth returns. 

The Quarters That Were
Atheros reported 4% sequential sales growth, as an exceptionally strong result in the consumer business offset weakness in PCs and networking. Inventories rose by 10% on a sequential basis, and the company trimmed fourth quarter guidance by about 10% relative to prior expectations. While the company has quality customers like Hewlett Packard (NYSE:HPQ) and Amazon (Nasdaq:AMZN), consumer products cannot fully compensate for the weaker PC and networking environment. Atheros is still small enough that individual product delays like the pushout of Nintendo's 3DS still matter.

For the far larger Texas Instruments, sales were up a similar amount - 7% on a sequential basis. TI did see an improvement in gross margins, though. Performance was strongest in high-performance analog, but a 0.92 book-to-bill is not encouraging, and it looks like TI is in for a couple of quarters of sequential revenue declines. That is broadly consistent with what Linear Technology (Nasdaq:LLTC), another major analog player, has been saying and TI management does not seem to see anything unusual in this mid-cycle slowdown. (For more, see Is Linear A Canary Or A Duck?)

Please click the link for the full piece:
http://stocks.investopedia.com/stock-analysis/2010/Atheros-And-Texas-Instruments--Chips-Ahoy-ATHR-TXN-INTC-BRCM-LLTC-AMZN1027.aspx