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Texas Instruments Inc. (TXN - Analyst Report) or "TI" recently announced its plans to cut more than 500 jobs at its French research and development plant in Villeneuve-Loubet region, near Nice. The headcount reduction is scheduled to be complete in the next few months.
The Villeneuve-Loubet facility makes microprocessors used in smartphones and tablets. Of late, some of its prime customers including Apple Inc. (AAPL - Analyst Report) started developing the chips internally, giving TI’s business a jolt. Eventually, the company planned to shift its focus to industrial and automotive customers, which led to these 517 jobs cuts. Currently, Texas Instruments employs 609 people in France.
Last month, the company announced that it plans to eliminate 1,700 jobs worldwide in order to reduce operational costs. This layoff is an attempt by the company to optimize its cost structure and cut spending in its wireless business.
Though the company has made chips for devices such as Motorola Droid and Amazon’s (AMZN - Analyst Report) Kindle Fire tablet; Qualcomm (QCOM - Analyst Report) and Samsung are far ahead in the race. The increasing competition from players such as these as well as in-house development efforts of large customers has led TI to turn away its focus from the segment.
Management is now looking to restructure its businesses by focusing on its OMAP processors and wireless connectivity on embedded solutions for the automobiles, industrial and other non-consumer markets, which have a longer life cycle.
To continue its strong global growth momentum and increase its market share, TI needs to refine its cost structure. We believe the restructuring action will bring in stability and steady earnings growth in the near future. The longer-cycle businesses will also lend stability to its revenues and the more favorable competitive climate could help it generate stronger margins.
Texas Instruments is one of the largest suppliers of analog and digital signal processing (DSP) integrated circuits. The company’s compelling product lineup, increasing differentiation in its business, restructuring activities and lower-cost 300mm capacity should drive earnings in the longer term.
The company’s third-quarter earnings were up 27.2% sequentially and exceeded the Zacks Consensus Estimate by 17 cents or 37.8%.
Currently, Texas Instruments has a Zacks #3 Rank (Hold).