Texas Instruments reports earnings and sees a turn for the chip business

Chip giant Texas Instruments (TXN) may finally be seeing a lasting turnaround in the fortunes of the ailing semiconductor industry. After several quarters of merely getting worse more slowly, end demand for its customers' products is finally rekindling, the company said on a conference call for investors.

On Monday, TI reported third-quarter profits and sales that topped Wall Street estimates while boosting its outlook for the coming quarter. The company said it earned $538 million, or 42 cents per share, during the quarter, down four percent from $563 million, or 43 cents a share, a year earlier. Sales fell 15 percent to $2.88 billion amid the economic downturn, compared with $3.39 billion in 2008.

The results surpassed the company's September forecast and topped analysts' estimates. According to Thomson Reuters, analysts were expecting earnings of 39 cents per share on sales of $2.82 billion.

Business fell off a cliff at the onset of the financial crisis late last year and remained depressed through the start of the current year, Ron Slaymaker, vice president and head of investor relations said. And while TI saw a solid pickup over the last two quarters, that demand mostly came from businesses finally making purchases they had previously put off.

"Initially, this rebound was driven by normalization of demand as our customers slowed their inventory reduction and our shipments began to increase to their level of production," Slaymaker said. "This quarter, that normalization process has been complemented by production increases at our customers."

With a role in almost all tech gear and consumer electronics, semiconductors are often seen as the broadest gauge of the tech industry's health. TI's quarterly report comes on the same day that Apple (AAPL)blew past investor expectations and follows a sharp quarterly beat by Intel(INTC) the prior week.

Still, even as some signs of an economic turnaround emerged, investors haven't been convinced that the current cycle is anything more than replenishing of depleted inventories. TI seems to offer some hope that the reemergence of demand may go beyond just that.

The company said it increased capital expenditure $226 million over the current quarter, most of which was driven by "operational bottlenecks that are associated with the significant increases in demand we are seeing."

While Asia continues to be generating most of the growth, revenues in Europe and the U.S. increased about 10 percent quarter-over-quarter following a year-long slide, the company said.

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