Texas Instruments reports strong earnings in 3Q14 (Part 5 of 14)

(Continued from Part 4)

Cost-cutting initiatives

In January 2014, Texas Instruments Incorporated (TXN) joined the cost-cutting bandwagon along with its technology peers, Hewlett-Packard Company (HPQ) and EMC Corporation (EMC). It began reducing its workforce to become more profitable.

As the below chart shows, the economic slowdown in 2008 forced many companies to announce job cuts, including those in the technology industry. Texas Instruments’ workforce reduction affected the mobile segment and those divisions of embedded processing that have witnessed, or are expected to witness, slow growth.

The company’s chip-making peers Intel Corporation (INTC) and Advanced Micro Devices, Inc. (AMD) also announced decisions to cut jobs in January 2014. Intel lost 5% of its workforce as the company struggled with declining PC sales and priority shifts.

Texas Instruments eliminated approximately 1,100 jobs globally, which is equivalent to 3% of its workforce. The company expects annual savings of ~$130 million to be generated, beginning in 2014, as a result of the cuts. According to management, the restructuring is important and will allow the company to become a more profitable entity in the future.

Renewed focus on embedded and analog chips market

As mentioned earlier in this series, Texas Instruments began restructuring when it decided to exit the smartphone and tablet markets. It did so to instead focus on embedded processors and analog chips for automotive and industrial equipment markets.

The company plans to downsize its operations in Japan, which make smaller contributions to the company’s overall revenues. Also, Texas Instruments expects limited opportunities in the Japanese market.

Continue to Part 6

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