Heavy Research Spending Now Paying Off

Article Excerpt

TEXAS INSTRUMENTS, INC. $29 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) is one of the world’s top suppliers of chips for electronic devices such as mobile phones and DVD players. This business accounts for over 95% of its revenue. The rest comes from handheld calculators. It also makes money licensing its technology to other manufacturers. The company’s revenue grew steadily, from $8.2 billion in 2001 to $13.4 billion in 2005, due to growing demand for mobile phones and high-speed computer modems. Restructuring fueled huge profit gains Income before unusual items shot up from $0.12 a share ($209.0 million) in 2001 to $1.34 a share ($2.2 billion) in 2005, thanks to savings from a major restructuring plan. In 2005, Texas Instruments spent $2.0 billion (14.9% of total revenue) on research, up slightly from $1.98 billion (15.7% of revenue) in 2004. Accounting rules force it write off these costs immediately, which hurts its earnings. But this heavy commitment to research…

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