Texas Instruments Incorporated (TXN)’s Fourth Quarter and Year-End 2014 Earnings Call Transcript

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Dave Pahl VP, Head of Investor Relations

And I will just point out too Stacy that that does not assume the reinstatement of the R&D tax credit that we got for 2014.

Kevin March, SVP & Chief Financial Officer

If that does reinstate, that would be between 1 and 2 points of tax benefits.

Dave Pahl VP, Head of Investor Relations

Okay we go to the next caller please.

Operator

We go next to Vivek Arya, Bank of America Merrill Lynch

Vivek Arya, Bank of America Merrill Lynch

Thanks for taking my question. Actually when I look at your Q4 results versus consensus estimates, you did better in your core analog and embedded segment. But there were some shortfall on the other sales which are actually down 6% year-on-year. I think they were down almost 11% last year. I believe you mentioned some loss of ASIC business. I am wondering, what is the right way Kevin, or Dave, to model the segment because it is a very profitable segment for you and it is still decent sized segment. I think in the past you have mentioned that it could be sort of flattish, plus minus 2% or so. So just conceptually, what is the right way to model the segment?

Dave Pahl VP, Head of Investor Relations

Yes if you look back at the other segment, the first thing I would point out is, it has a calculated revenue and the seasonally strong back-to-school season happened in the second and third quarter. So it tend to be the seasonally strongest quarter. Third or fourth biggest transition sequentially of course is due to the change of that business. If you look overall, you can look at the components that sit inside of other. The first is DLP and I described that as the more steady business and one that might have some, we described as wildcards of new opportunities. The vast majority of that business is in front projectors today as well as in cinema and we got some what we call pico projectors or small form factor projectors that make up the revenue.

But there are some opportunities from inside of automotive and other embedded opportunities that could provide growth in the future. The next biggest piece of that revenues is calculators and that business has been, I’d say flat or maybe slightly down overtime. Royalties have run steady, about $40 – $50 million a quarter, and that is probably a good thing to look. And then we will have ASIC that will transition over to EP overtime. That is some business that is in communications infrastructure and we believe that that would move over. So you combine all that stuff together and kind of think that the other segment will be flat maybe up or down a percentage point as we have described in the past.

Kevin March, SVP & Chief Financial Officer

And I think Vivek you also asked about year-over-year. Well, just recall that last year we still have about $55 million or so of wireless revenue in it. And this yer essentially zero. So that is your biggest decline in year-over-year basis.

Vivek Arya, Bank of America Merrill Lynch

So as my follow on, back to your core business. Do you think you have the right scale in your embedded business to take on off margins into the 20s? When I look at the three areas within that business, processors, connectivity, micro controllers. How would you rank TI against the best competitor in that segment? And really, I am trying to understand how you can grow that segment gain share, improve margins while keeping investments flattish while all your competitors are all investing in their respective businesses. Thank you.

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