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Recently, Texas Instruments (TXN - Analyst Report), or "TI," raised its revenue and earnings expectations to the upper end of its previously forecasted ranges for the first quarter of 2013.

The chipmaker now expects sales of $2.80–$2.91 billion versus its previous guidance of $2.69–$2.91 billion. The lower end of the earnings outlook range has also been raised to 28–32 cents per share from the previous guidance of 24–32 cents. The earnings guidance includes acquisition and restructuring charges and tax benefit of 6 cents per share.

Management stated that it is seeing improving demand for its chips from industrial customers and better-than-expected wireless chip sales. TI said that the demand for chips used in tablets and handsets was better-than-expected, but revenue from the Wireless segment would still decline in the first quarter as it is gradually defocusing the mobile business (and transferring the remaining wireless business to the Other segment).

However, the company admitted that it was still seeing weakness in the notebook and communications infrastructure markets.

Like other chip makers, TI has struggled in recent quarters due to a slow global economy and weak consumer spending. To maintain momentum, the company responded in part by cutting costs and trying to expand the use of its application processors on embedded solutions for the automobile, industrial and other non-consumer markets, which have a longer life cycle.

Last month, the company increased its quarterly dividend by 33% and authorized the repurchase of additional shares worth $5 billion. Management said that the company is witnessing improving order backlog for the first time in several quarters due to improving demand from end-users rather than chip inventory restocking. These facts provided by TI are modestly encouraging but does not necessarily mean that the broader semiconductor market is on the road to recovery.

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. In the fourth quarter, TI posted decent numbers, with both revenues and earnings surpassing our expectations.

Currently, Texas Instruments has a Zacks Rank #3 (Hold). Other stocks that have been performing well and are worth considering include Intersil Corporation (ISIL - Snapshot Report), Qualcomm Inc. (QCOM - Analyst Report) and KLA-Tencor (KLAC - Analyst Report), all carrying a Zacks Rank #2 (Buy).

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