Comments on: TXN: Texas Instruments Inventory Correction Not Corrected

By: ASP Business-House » Blog Archive » IBN Stocks & Investing Festival #12

Tue, 31 Jul 2007 08:13:09 +0000

[…] Stock Market Beat presents TXN: Texas Instruments Inventory Correction Not Corrected. […]

By: IBN Stocks & Investing Festival #12 | The Wall Street Matador

IBN Stocks & Investing Festival #12 | The Wall Street Matador — Tue, 31 Jul 2007 00:29:48 +0000

[…] Trent presents TXN: Texas Instruments Inventory Correction Not Corrected. […]

By: Trent

Trent — Tue, 24 Jul 2007 14:39:05 +0000

Yet the stock was rising while the distributors were building inventory and revenue was overstating actual demand. I could be wrong, but I don’t recall TI going out of their way to point that out.

You are absolutely correct that the “true” measures to look at are the disty sell-through and the combined company/disty inventory. But most investors have little way of knowing how much of Arrow/Avnet’s inventory and sales were TXN related.

Perhaps TXN could join the rest of the analog companies in reporting disty sales on the more conservative sell-through basis rather than sell-in. Then they would keep the inventory on their own books and the sales and inventory would all properly reflect end demand. In the meantime, investors just have to take their word for it. And I hate taking management’s word for anything.

By: sean

sean — Tue, 24 Jul 2007 14:24:48 +0000

they did cut back on their production and more importantly cut back production at their foundry partners. the best thing about txn’s mfg model is that they do about 50% of production in-house and 50% external thru Asian foundries. hence they usually keep their own production close to 100% utilization and tweak their external production. to me what was missed in the initial discussion was TXN’s comments that they shipped/sold less into the channel (how they recognize revenue) vs their sell-out (from disti partners). hence their revenue is understating actual demand. i believe that this qtr TXN should actually sell more into the channel than sell-out as their partners now have too little inventory onhand which will allow TXN to show upside.

By: Trent

Trent — Tue, 24 Jul 2007 13:49:29 +0000

Sean, thanks for the correction.

That is a good point, but knowing that these customers had too much inventory wouldn’t it have made sense for TXN to cut down on their own production?

By: sean

sean — Tue, 24 Jul 2007 13:20:59 +0000

The inventory correction that TXN talked about is with their distribution customers (Arrow and Avnet) and their end customers. Take a look at those companies balance sheets and I beleive you will see how much they have brought down their inventories over the past 6-9 months.