A Mixed End to a Rebound Year
As is so often the case, the strength of Texas Instruments' quarterly results depends very much on the frame of revenue. After all, 17% year-on-year revenue growth sounds good - up to the point when it translates into a 7% decline in sequential performance. Analog is TI's biggest segment, and revenue here was up 20% annually and down 4% sequentially, while embedded processing saw a 31% annual increase and 7% sequential decrease. Wireless was comparatively boring, up 1% from last year and flat relative to the third quarter.
Profitability was not quite as positive for TI. Due at least in part to higher capacity and lower utilization, gross margin fell 150 basis points from last year. Although the company did do a solid job of holding the line on operating expenses, the decline in gross margin led operating margin to contract about 200bp on a sequential basis, while rising 170bp from last year after adjusting for a divestiture gain. (For more, see The Bottom Line On Margins.)
Orders fell 4% from last year and 9% from the third quarter, leading to a 0.89 book-to-bill ratio. While management did say that lead times were back to normal (suggesting that the book-to-bill should have bottomed), it is worth noting that inventory did climb almost $100 million on a sequential basis and stands (on a days sales basis) at a pretty high historical level.
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