Texas-based computer company gropes for market

TI IN TROUBLE

August 05, 1991|By Tom Steinert-Threlkeld | Tom Steinert-Threlkeld,Dallas Morning News

Dallas -- A decade ago, Texas Instruments held the world in its hands.

The company was the world's leading supplier of integrated circuits, the fingertip-size type of microelectronics it pioneered. Its hand-held calculators changed the way the world added numbers; its Speak N Spell talking toys electrified children's education. It commanded a worldwide work force of nearly 90,000, and top executives openly boasted of plans to reach $10 billion in annual sales.

Now, intense competition and weak economies seem to hold TI in a vise.

The company has responded by spending lots of money -- enough, it hopes, to once again put it on the cutting edge.

"If we had not chosen to keep the heat on," said TI Vice President Liston M. "Mike" Rice Jr., "our profitability would be much better than it is, but our future would be much more limited than it is."

By cutting investment in the future, "we could be making a profit, and we could be continuing to lose market share," Mr. Rice said. "And somewhere in there, we would become a real niche player in the semiconductor industry."

Intense competition from global companies, combined with sluggish U.S. and European economies and slack demand for computers and other chip-using equipment, haven't helped TI.

Losses and job cuts have almost become routine for Dallas' largest corporate employer. TI has been in the red by $280 million in the past four quarters. That exceeds $152 million in losses from a similar string of deficits that began in 1985 and outweighs $230 million in losses that coincided with the company's exit from the home computer field in 1983.

Yet even those losses may understate the difficulties TI faces in its businesses, some analysts say. If it weren't for an accounting change, the company's losses from its chip, defense and information technology businesses would total nearly $500 million. Losses would extend back seven quarters, analysts note.

By fall, TI's worldwide work force will be 65,000, almost 30 percent below its peak. In North Texas, employment has been cut 20 percent in the past 2 1/2 years.

The economy and demand for electronics is expected to rebound, but analysts believe that will take time.

The company has never reached $10 billion in annual sales. Allowing for inflation, the company's 1990 sales of $6.6 billion were no larger than figures recorded in 1980, and it has slipped to No. 6 among the world's merchants of microchips and to No. 3 among U.S. suppliers.

Job cuts may become a way of life, company officials say. TI anticipates another loss in the next quarter. The only debate is how big it will be.

"The present is not very pleasant," Mr. Rice said. "It is very tough."

In some respects, TI suffers the same pain as other large U.S. computer and microchip companies. Computer maker Unisys Corp. has reported a $1.3 billion loss. Digital Equipment Corp. has said it will restructure at a cost of $1.1 billion. Even supercomputer darling Convex Computer Corp. recently announced its first loss since its start-up days.

Old-line chipmakers also have suffered. Advanced Micro Devices Inc. has lost money in three of the past five years, including $53.5 million in 1990. National Semiconductor Corp. has lost money in five of the past six years, including $151.4 million during the 12 months ended in May 31.

But even those weak semiconductor companies have been marginally profitable in recent quarters. "Only National is in as dire straits as TI," among major U.S. chipmakers, said Daniel L. Klesken, an analyst at Prudential Securities Inc. in San Francisco.

Intensifying worldwide competition, usually from Japan and Asia, pressures prices, which pressures profits. The escape valve is cutting jobs. This will persist throughout the '90s, says Vladi Catto, TI's chief economist.

"The cost-cutting and the downsizing . . . that we need to put in place to meet competition will continue," Mr. Catto said.

TI's productivity ranks among the lowest in the semiconductor industry, according to In-Stat Inc., a Scottsdale, Ariz., research firm that suggests TI could generate the same amount of revenues each year with fewer employees.

TI has improved its revenues per employee dramatically in the past decade. After allowing for inflation, TI in 1990 generated $97,177 in revenues for each worker, compared with $74,829 in 1980. But revenues, after inflation, essentially were unchanged.

Even with the gain in productivity, TI is lagging. Other chip companies typically achieve between $130,000 and $140,000 in revenues for each worker, said Dean McCarron, In-Stat's vice president of technology.

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