February 26, 2001–Dallas, Texas–Texas Instruments Inc. (TI) reports that revenue for the first quarter of 2001 will be lower than previously expected, due to the economic slowdown that is continuing to constrain demand for technology products.
TI initially experienced a sharp downturn in its markets late in the fourth quarter of 2000, as its customers reacted to weakening demand and higher inventories. Market conditions have not improved during the quarter and customers have continued to cancel or reschedule backlog, causing visibility to remain limited.
As a result, TI believes that first quarter revenue will decline about 20% compared to the fourth quarter, instead of its previous estimate of about 10%. Due to the additional drop in revenue, pro forma operating margin is expected to decline about 6 to 8 percentage points, instead of the earlier estimate of 5 to 6 percentage points.
Early in the quarter, TI began a phased cost-reduction plan to limit the impact of reduced revenue on profitability. Actions include the temporary idling of manufacturing facilities and shortened workweeks in some areas. Throughout the company, TI has put a temporary freeze on hiring, has significantly cut discretionary expenses such as travel, and today has announced a voluntary retirement program. Additionally, the company has lowered its capital spending plans for 2001 to $2 billion, a 30% reduction from last year’s $2.8 billion.
TI is continuing its strong R&D investments, estimated to be $1.7 billion for 2001, up from $1.6 billion last year. “The strength of our balance sheet gives TI the ability to maintain strategic levels of capital and R&D investments. These investments are focused on areas that increase our competitiveness and efficiency, including 300mm manufacturing for DSP, 200mm manufacturing for Analog, and 0.13-micron technologies,” says Tom Engibous, TI chairman, president and CEO. “We continue to believe that DSP and high-performance analog are the core technology drivers of the Internet Age.”