It’s easy to forget that the smartphone/tablet revolution that’s currently driving electronics sales in the US is only good for the companies that align themselves properly. Texas Instruments‘ recent profit warning is an excellent example of how weak positioning can hurt even a prominent manufacturer. The company has cut guidance for Q1 to 15-19 cents per share, down from 16-24 cents. Revenue is expected to be between $2.99 – $3.11B, down from $3.02 – $3.28B.
Company CEO Ron Slaymaker attributed the drop in projected revenue to weaker demand for customer products, but was unwilling to state which customers, in particular, were responsible. Prime candidates are RIM and Amazon. Demand for RIM products has been plummeting for several quarters, but weak Kindle Fire sales could be a warning sign for Amazon’s scrappy tablet.
One comment Slaymaker made regarding TI’s long-term plans for OMAP is particularly interesting. Asked to discuss Texas Instruments’ long-term plans for OMAP, Slaymaker responded, “there’s a big effort underway to take the OMAP technology that has done so well today in smartphones and tablets and really leverage that into other horizontal markets.” That doesn’t automatically mean PCs — the CEO mentioned automotive, battery, and storage industries as areas where TI has seen product growth — but it’s an illustration of how the company believes diversifying out of its traditional market will drive future growth.
As for tablet/smartphone demand, it’s entirely possible that TI is seeing weaker-than-expected demand thanks to Qualcomm’s superior positioning. The Snapdragon S4 and its 28nm LTE modem are currently in the driver’s seat as far as performance and battery life are concerned, a fact that leaves Texas Instruments fighting with Nvidia for leftovers. Qualcomm’s early-mover advantage should decline by Q3/Q4 as OMAP5 devices based on the Cortex-A15 CPU become available, but Texas Instruments could find itself fighting for space in low-end computers.
Slaymaker doesn’t mention Windows 8 by name, but TI will be watching activity in that market with a very keen eye. Windows 8′s launch will be the equivalent of a starting bell for the various ARM manufacturers anxious to break into the PC market — and competition between them will be absolutely cutthroat.