Texas Instruments Inc. $32 - New York symbol TXN

TEXAS INSTRUMENTS INC. $32 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.4 billion; Market cap: $44.8 billion; WSSF Rating: Average) is more versatile than Intel or Nvidia. That’s because it makes chips for a wider variety of electronic devices, including mobile phones, digital cameras and DVD players. It has over 50,000 customers, although mobile phone maker Nokia Corp. accounts for about 15% of its total revenue. Strong competition in the chip industry continues to drive down prices. To help keep its profit margins high, Texas Instruments is now working on ways to cut its manufacturing costs. For example, it now outsources about half of its advanced digital chip manufacturing to outside firms. Texas Instruments feels these moves, plus closing older plants, will save it $200 million a year. Texas Instruments earned $0.52 a share (total $758 million) in the third quarter of 2007, up 15.6% from $0.45 a share ($686 million) a year earlier. Revenue, however, slipped to $3.66 billion from $3.76 billion. Research spending in the quarter fell 4.9%, to $542 million (14.8% of revenue) from $570 million (15.2% of revenue). The company is using its strong earnings to expand its presence in other high-potential fields. It recently acquired privately held Integrated Circuit Designs Inc., which designs radio frequency integrated circuits. These products are the main component in Radio Frequency Identification (RFID) tags, which help retailers keep track of track their inventories. New applications for RFIDs, such as embedding them in passports and credit cards to make them more secure, should continue to spur demand for this technology. Another promising acquisition is the company’s purchase of PowerPrecise Solutions Inc., which specializes in re-chargeable battery technology. The purchase should help Texas Instruments design chips that use less energy, and help extend the battery life of mobile phones and other devices. Texas Instruments will probably earn $1.78 a share in 2007, and the stock trades at 18.0 times that figure. The $0.40 dividend yields 1.3%. Texas Instruments is a buy.