Texas Instruments to sell sensors unit for $3 billion

Company wants to focus on business of making chips for mobile telephones

January 10, 2006|By BLOOMBERG NEWS

DALLAS -- Texas Instruments Inc., seeking to focus on mobile-phone chips, reached a $3 billion agreement with Bain Capital LLC yesterday to sell a unit that makes sensors used in cars, air conditioners and industrial equipment.

The sale frees Texas Instruments of a business that is growing at half the rate of the rest of the company, Robert W. Baird analyst Tristan Gerra said. Chief Executive Officer Richard K. Templeton is emphasizing processors for handsets that play videos and surf the Web.

"Wireless is the hottest segment for them, and everyone's zeroing in on the semiconductor group," said Daniel Morgan, who helps manage $5.45 billion, including Texas Instruments shares, at Synovus Investment Advisors in St. Petersburg, Fla. "They're looking for the areas with the most growth."

Texas Instruments, the world's largest maker of chips that run mobile phones, is getting rid of a unit that trails competitors General Electric Co. and Honeywell International Inc. With $1.1 billion in 2004 sales, the sensors business is dwarfed by Texas Instruments' $10.9 billion semiconductor unit.

"Going into the future, semiconductors will continue to have higher revenue growth rates and higher profitability," Texas Instruments Chief Financial Officer Kevin March said.

Texas Instruments shares declined 36 cents to close at $34.18 on the New York Stock Exchange. They gained 30 percent last year. The Wall Street Journal has said analysts estimate the unit is worth about $2.5 billion.

The purchase by Bain, a Boston-based buyout firm, follows $21 billion of technology-related acquisitions by private-equity companies last year. That compares with $5.7 billion in 2004 and $185 million in 2001. The transactions made up 8 percent of the record $256 billion in buyouts last year.

The sale of the sensors and controls unit, which has 5,400 employees, doesn't include radio frequency identification tags used by retailers. That business had $110 million in 2005 sales.

Sales from sensors were up about 2 percent last year, compared with 4 percent sales growth for the rest of the company, according to Baird analyst Gerra, who is in Milwaukee, rates the shares "outperform" and said he doesn't own them. He spoke before the announcement.

Bain said long-standing customer relationships and a high percentage of international sales will help the unit's growth continue.

"There are some big players, but Texas Instruments' sensors and controls business has carved out some strong competitive positions," said Steve Zide, a managing director at Bain.

The sale leaves Templeton free to concentrate on handsets. New phones require more than double the chips older models use. The wireless business accounts for about a third of annual sales, and the company also makes chips used in industrial equipment and other consumer electronics.

Demand for wireless-related products is soaring as customers such as Nokia Corp. and Motorola Inc., the world's two biggest handset makers, create both more-complicated phones and simpler models for emerging markets such as India and China.

Gartner Inc. raised its forecast for global handset sales three times last year, and said Nov. 22 that phone makers would ship 810 million units, up from 674 million in 2004. The market will grow 10 percent to 15 percent more in 2006, the Stamford, Conn.-based researcher said.

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