Texas Instruments 4Q15 Earnings Call Notes

Texas Instruments, Incorporated. (TXN) Q4 2015 Results

David Pahl – Vice President and Head of Investor Relations

Saw weakness in mobile phones

“The sector where we saw the weaknesses you were guessing is mobile phones and we did see that sector weaken late in the quarter, in the back half of the month of December. If I just take and look at for the year how our end markets did, I’ll put that into perspective. I’ll start with an area of strength in automotive. That grew in the mid teens. Most of the sectors inside of that growing, growing double-digits…Communications equipment was down 20%. And that was primarily driven by wireless infrastructure and that was down around 30% for the year. ”

We haven’t seen any sign posts that this is a traditional cycle

“We’ve had some people ask us if we think a semiconductor cycle is underlying what we’re seeing and we just haven’t seen those signs of a traditional cycle. So there are things like our lead times continue to remain short. Our cancellations remain very low. Our distribution inventory continues to hold around 4 weeks. And we continue to deliver our products on time to our customers when they’re asking at very, very high service levels. So those are some of the bigger ones that come to mind, that you would see some movement if you were moving through a bottom or a top of the cycle, and we just haven’t seen that in quite some time.”

Our industrial exposure is very different than most might expect

” just want to remind those that may not be as familiar with us, when we talk about our industrial market, it’s something that’s very broad and different than what a typical investor would look from an industrial screen. So we’ve got 14 sectors that makes up industrial and they’ll include things like factory automation, medical and healthcare, building automation, grid infrastructure, test measurement, motor drives, electronic point of sale, space and avionics, display power delivery, appliances, lighting, industrial transportation and then a bucket of everything else that goes into it. So slightly or very different than what most people would think of in industrials.”

We think there’s more semiconductor content going into the industrial market and we’re being buoyed by that

“typically a lot of people ask us, hey, we hear the rumors in China. We see the stocks that they follow maybe in the industrial segment are seeing very, very, very weak demand. But we turned in revenue that was consistent with what we saw after a very strong year. And fundamentally what we think’s going on inside of that is that there’s more semiconductor content going into the industrial market and we think we’re in the very early stages of that.”

Kevin P. March – Senior Vice President, Chief Financial Officer, Finance & Operations

Weak macro economy, but aside from personal electronics, the balance is pretty flat

“I think that at the highest level, we think we’re continuing to operate in a relatively weak macro economy as we have been for the last couple of years. So nothing terribly exciting in the economy as a whole. If we kind of look at the comparison we’re talking about, recall that a year ago, we were seeing sharp declines occurring in communications infrastructure and we’re also seeing some pretty stiff headwinds in the form of foreign exchange where if the rate of exchange moving against us from the US dollar strength standpoint. So despite that, when you take a look at all that, we actually see aside from this one sector of personal electronics, the balance of it’s going to be about even on a year-over-year basis.”