TI Reports 1Q01 Financial Results

- Pro Forma EPS of $0.18

- Revenue Down 8% from Year-Ago Quarter and 17% Sequentially

- Sequential Broadband Revenue Up 15% on DSL Strength; Wireless and

Catalog Down

- Revenue Expected to Decline About 20% Sequentially in 2Q01

- Additional Cost-Cutting Actions Planned, Including 6% Workforce

Reduction



Conference Call on TI Web Site at 3:30 p.m. Central Time Today

www.ti.com



Apr 17, 2001, 01:00 ET from Texas Instruments Incorporated

    DALLAS, April 17 /PRNewswire/ -- First-quarter financial results for Texas
 Instruments Incorporated (NYSE:   TXN) were impacted by a combination of weak
 electronic end-equipment demand and excess customer inventories, resulting in
 reduced demand for its semiconductor products.  TI's revenue in the quarter
 was $2528 million, down 17 percent sequentially.  Pro forma earnings per share
 (EPS) were $0.18.
     Early in the first quarter, TI began an aggressive cost-reduction plan to
 limit the impact of reduced revenue on profitability.  Actions have included a
 voluntary retirement program, shortened workweeks in some areas, and
 consolidation of certain manufacturing operations.  Overhead costs were
 significantly reduced, maintaining pro forma SG&A (selling, general and
 administrative) expenses at the same percentage of revenue as in the fourth
 quarter.  To further align the company's expenses with near-term revenue
 expectations, TI will lay off about 2,500, or 6 percent, of its employees
 worldwide.  These reductions will begin in the second quarter and the company
 will take associated special charges at that time.  Most of these job
 eliminations are in support functions and manufacturing.  In total, these
 actions are expected to result in annualized savings of approximately
 $400 million when completed.
     "We are in one of the sharpest decelerations that our industry has
 experienced, and it requires that we move fast to make hard but prudent
 business decisions.  The most difficult decisions are layoffs, because they
 affect our people," said Tom Engibous, TI chairman, president and CEO.
 "Despite the short-term market conditions, the long-term megatrends in society
 continue to move toward a networked world of high-speed communications that
 depend on the real-time capabilities of DSP and Analog semiconductors.  The
 economy will get better.  As it does, TI will emerge an even stronger
 competitor."
     Pro forma information excludes certain costs, charges and gains.  For more
 information, see financial statements.
 
     Summary of 1Q01 Financial Results
      -- Revenue for TI was $2528 million, down 8 percent from $2761 million in
         the year-ago quarter, and down 17 percent sequentially due to weakness
         in semiconductor.
 
      -- Pro forma operating profit was $340 million, down from $608 million in
         the year-ago quarter and from $683 million in the fourth quarter of
         2000 due to lower semiconductor revenue.  Pro forma operating margin
         was 13.5 percent, down 8.5 percentage points from the year-ago quarter
         and 9.0 percentage points from the fourth quarter of 2000 due to lower
         semiconductor revenue.
 
      -- Pro forma income for the quarter was $317 million, compared with
         $494 million in the year-ago quarter and $549 million in the fourth
         quarter of 2000.
 
      -- Pro forma EPS decreased to $0.18, down from $0.28 in the first quarter
         of 2000 and $0.31 in the fourth quarter of 2000.
 
      -- Orders in the first quarter were $1898 million, compared with
         $2996 million in the year-ago quarter and $2772 million in the fourth
         quarter of 2000.
 
      -- According to generally accepted accounting principles, for the first
         quarter of 2001:  operating profit was $229 million, compared with
         $554 million in the year-ago quarter; operating margin was
         9.0 percent, compared with 20.0 percent; net income was $230 million,
         compared with $421 million; and diluted EPS decreased to $0.13,
         compared with $0.24.
 
     Outlook
     TI expects revenue to decline about 20 percent sequentially in the second
 quarter as semiconductor customers continue to work through excess inventories
 in an environment in which consumption of their electronic end-equipment
 products continues to be weak.  Due to continuing uncertain economic
 conditions, it is unclear when demand for TI's semiconductor products will
 strengthen.
 
     Specifically, TI expects the following for the second quarter:
      -- Revenue from semiconductor to decline sequentially, with weakness
         affecting almost all product areas;
      -- Revenue from TI's non-semiconductor activities, including Sensors &
         Controls and Educational & Productivity Solutions, to increase
         sequentially, primarily reflecting seasonal retail stocking for back-
         to-school sales of calculators;
      -- Operating margin to decline to about breakeven pro forma as a result
         of lower revenue; and
      -- Non-operating income to decline to about $40 million pro forma.
 
     For 2001, TI expects the following:
      -- Research and development (R&D) of $1.6 billion pro forma, down from
         the prior estimate of $1.7 billion;
      -- Capital expenditures of $1.8 billion, down from the prior estimate of
         $2.0 billion;
      -- Depreciation of $1.5 billion pro forma, unchanged from the prior
         estimate;
      -- Amortization of acquisition-related costs of $240 million; and
      -- A tax rate of 26 percent pro forma, down from the prior estimate of
         31 percent.
 
                          PRO FORMA INCOME INFORMATION
              (In millions of dollars, except per-share amounts.)
 
     Pro forma supplemental income information, which is not prepared in
 accordance with generally accepted accounting principles, excludes
 amortization of acquisition-related costs (goodwill, other intangibles and
 deferred compensation), pooling of interests transaction costs, purchased in-
 process research and development costs, and special charges and gains.  See
 notes to the following tables for details.  The effect of these amounts is
 partially offset, as appropriate, by their allocated profit sharing and income
 tax effects.
 
                                           For Three Months Ended
                                            Mar. 31      Mar. 31
                                               2001         2000
 
     Net revenues                             $2528        $2761
 
     Cost of revenues                          1452         1389
     Research and development                   427          379
     Selling, general and administrative        309          385
 
 
     Profit from operations                     340          608
 
     Other income/interest                       89          107
 
     Income before provision for income taxes   429          715
 
     Provision for income taxes                 112          221
 
 
     Pro forma income                         $ 317        $ 494
 
 
     Pro forma earnings per common share:
         Diluted                             $  .18       $  .28
 
         Basic                               $  .18       $  .29
 
 
                  TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                           Consolidated Income Statement
                (In millions of dollars, except per-share amounts.)
 
 
                                           For Three Months Ended
                                            Mar. 31      Mar. 31
                                               2001         2000
 
     Net revenues                            $2528         $2761
     Operating costs and expenses:
      Cost of revenues                        1505          1420
      Research and development                 446           386
      Selling, general and administrative      348           401
 
       Total costs of operations              2299          2207
 
 
     Profit from operations                    229           554
     Other income (expense) net                107           128
     Interest on loans                          16            21
 
 
     Income before provision for income
      taxes and cumulative effect of an
      accounting change                        320           661
     Provision for income taxes                 90           211
 
     Income before cumulative effect of an
      accounting change                        230           450
     Cumulative effect of an accounting
      change                                   ---           (29)
 
 
     Net income*                            $  230        $  421
 
 
     Diluted earnings per common share**:
       Income before cumulative effect of
        an accounting change                $  .13        $  .25
       Cumulative effect of an accounting
        change                                 ---          (.01)
 
       Net income                           $  .13        $  .24
 
     Basic earnings per common share:
       Income before cumulative effect of
        an accounting change                $  .13        $  .26
       Cumulative effect of an accounting
        change                                 ---          (.01)
 
       Net income                           $  .13        $  .25
 
     Cash dividends declared per share
      of common stock                       $ .021        $ .021
 
 
     * Income for the first quarter of 2001 includes, in millions of dollars,
       net special charges of $50, of which $11 is severance cost for first
       quarter employee acceptances under the U.S. voluntary retirement program
       (which covers the corporate, semiconductor and sensors & controls
       activities and expired April 16, 2001), $16 is severance cost for
       restructuring actions in international semiconductor locations, mostly
       in Germany, and $25 relates to the fourth quarter 2001 closing of a
       semiconductor manufacturing facility in Santa Cruz, California.  Of the
       $25, $16 is for severance cost and $5 is for acceleration of
       depreciation over the remaining service life of the facility.  Of the
       $50 net special charges, $44 is an increase in cost of revenues, $7 in
       selling, general and administrative expense, $2 in research and
       development expense, and $3 in other income.  Income for the first
       quarter of 2000 includes, in millions of dollars, special charges of
       $29 associated with actions including the closing of the sensors &
       controls manufacturing facility in Versailles, Kentucky, and TI's
       acquisition of Toccata Technology ApS.  Of the $29, $20 is included in
       cost of revenues, $6 in selling, general and administrative expense, and
       $3 in research and development expense.
 
       Income includes, in millions of dollars, acquisition-related
       amortization of $59 and $25 for the first quarters of 2001 and 2000.
 
     ** Diluted earnings per common share are based on average common and
        dilutive potential common shares outstanding (1785.4 million shares and
        1782.0 million shares for the first quarters of 2001 and 2000).
 
 
                TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                           Consolidated Balance Sheet
              (In millions of dollars, except per-share amounts.)
 
                                            Mar. 31        Dec. 31
                                               2001           2000
 
     Assets
     Current assets:
       Cash and cash equivalents          $     304        $   745
       Short-term investments                  2785           3258
       Accounts receivable, less
        allowance for losses of
        $63 million in 2001 and
        $54 million in 2000                    1948           2204
       Inventories:
         Raw materials                          218            245
         Work in process                        678            681
         Finished goods                         284            307
 
           Inventories                         1180           1233
 
 
       Prepaid expenses                         140             80
       Deferred income taxes                    547            595
 
         Total current assets                  6904           8115
 
     Property, plant and equipment at cost     9702           9099
       Less accumulated depreciation          (3709)         (3652)
 
         Property, plant and equipment (net)   5993           5447
 
     Investments                               2661           2400
     Goodwill and other acquisition-related
      intangibles                               874            961
     Deferred income taxes                      116            106
     Other assets                               694            691
 
     Total assets                            $17242         $17720
 
 
     Liabilities and Stockholders' Equity
     Current liabilities:
       Loans payable and current portion
        long-term debt                       $   46         $  148
       Accounts payable                         795            997
       Accrued and other current liabilities   1042           1668
 
         Total current liabilities             1883           2813
 
 
     Long-term debt                            1228           1216
     Accrued retirement costs                   356            378
     Deferred income taxes                      495            469
     Deferred credits and other liabilities     278            256
 
     Stockholders' equity:
       Preferred stock, $25 par value.
        Authorized - 10,000,000 shares
        Participating cumulative preferred.
        None issued                             ---            ---
       Common stock, $1 par value.
        Authorized - 2,400,000,000 shares
        Shares issued:  2001 - 1,737,306,923;
        2000 - 1,733,237,248                   1737           1733
       Paid-in capital                         1249           1185
       Retained earnings                       9517           9323
       Less treasury common stock at cost.
        Shares:  2001 - 1,322,496;
        2000 - 1,184,880                        (96)           (93)
       Accumulated other comprehensive income   718            574
       Deferred compensation                   (123)          (134)
         Total stockholders' equity           13002          12588
 
     Total liabilities and stockholders'
      equity                                 $17242         $17720
 
 
                TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                            Statement of Cash Flows
                            (In millions of dollars)
 
                                                   For Three Months Ended
                                                     Mar. 31    Mar. 31
                                                        2001       2000
 
          Cash flows from operating activities:
           Income before cumulative effect of
            an accounting change                      $  230     $  450
           Depreciation                                  344        262
           Amortization of acquisition-related costs      59         25
           Deferred income taxes                          21         29
           Net currency exchange losses                    1          1
           (Increase) decrease in working capital
            (excluding cash and cash equivalents,
            short-term investments, deferred income
            taxes, and loans payable and current
            portion long-term debt):
              Accounts receivable                        234        (10)
              Inventories                                 54       (133)
              Prepaid expenses                           (61)       (15)
              Accounts payable and accrued expenses     (343)        90
              Income taxes payable                       (81)        (7)
              Accrued retirement and profit sharing
               contributions                            (371)      (192)
           Increase (decrease) in noncurrent
            accrued retirement costs                      (9)         4
           Other                                          41         (3)
 
          Net cash provided by operating activities      119        501
 
          Cash flows from investing activities:
            Additions to property, plant and equipment  (900)      (647)
            Purchases of short-term investments         (527)      (968)
            Sales and maturities of short-term
             investments                                1002       1209
            Purchases of noncurrent investments          (48)       (43)
            Sales of noncurrent investments               33         54
 
          Net cash used in investing activities         (440)      (395)
 
          Cash flows from financing activities:
            Payments on loans payable                    ---         (2)
            Additions to long-term debt                    3        243
            Payments on long-term debt                  (108)       (29)
            Dividends paid on common stock               (37)       (35)
            Sales and other common stock transactions     42         94
               Common stock repurchase program            (7)       (66)
 
          Net cash provided by (used in) financing
           activities                                   (107)       205
 
          Effect of exchange rate changes on cash        (13)       (18)
 
          Net increase (decrease) in cash and cash
           equivalents                                  (441)       293
          Cash and cash equivalents, January 1           745        781
 
          Cash and cash equivalents, March 31         $  304      $1074
 
 
                         BUSINESS SEGMENT NET REVENUES
                            (In millions of dollars)
 
 
                                                   For Three Months Ended
                                                     Mar. 31    Mar. 31
                                                        2001       2000
 
     Semiconductor
       Trade                                           $2172      $2382
       Intersegment                                        4          5
 
                                                        2176       2387
 
     Sensors & Controls
       Trade                                             260        264
       Intersegment                                      ---        ---
 
                                                         260        264
 
     Educational & Productivity Solutions
       Trade                                              81         79
 
     Corporate activities                                 (2)         2
     Divested activities                                  13         29
 
     Total net revenues                                $2528      $2761
 
 
 
                           BUSINESS SEGMENT PROFIT (LOSS)
                              (In millions of dollars)
 
 
                                                   For Three Months Ended
                                                     Mar. 31    Mar. 31
                                                        2001       2000
 
 
     Semiconductor                                      $304       $612
     Sensors & Controls                                   51         52
     Educational & Productivity Solutions                 17          8
     Corporate activities                                (38)       (70)
     Special charges/gains and acquisition-
      related amortization, net of applicable
      profit sharing                                    (109)       (54)
     Interest on loans/other income (expense)
      net, excluding a first-quarter 2001 gain of
      $3 million, included above in special
      charges/gains and acquisition-related
      amortization                                        89        107
     Divested activities                                   6          6
 
     Income before provision for income
       taxes and cumulative effect of an
       accounting change                                $320       $661
 
 
     Semiconductor
      -- Semiconductor revenue in the first quarter was $2176 million, down
         from $2387 million in the same period in 2000 and $2695 million in the
         fourth quarter of 2000 due to weak demand across a breadth of
         products.
 
      -- Semiconductor operating profit for the first quarter was $304 million,
         or 14.0 percent of revenue, compared with $612 million in the year-ago
         period and $679 million in the fourth quarter of 2000, primarily due
         to reduced product revenue and, to a lesser extent, lower royalties.
 
      -- Analog revenue was up 2 percent from the year-ago period and declined
         17 percent sequentially.  DSP revenue decreased 28 percent from the
         same quarter a year ago and 21 percent sequentially.  Analog and DSP
         comprised about 65 percent of TI's semiconductor revenue.
 
      -- TI's remaining semiconductor revenue decreased from the year-ago
         quarter and from the fourth quarter of 2000.
 
      -- TI's semiconductor revenue in key markets was as follows:
 
         -- Wireless revenue declined 34 percent compared with the year-ago
            quarter and 25 percent sequentially.
         -- Revenue from TI's catalog products, which includes DSP and high-
            performance Analog, increased 4 percent from the year-ago quarter
            and declined 15 percent sequentially.
         -- Broadband communications revenue, which includes digital subscriber
            lines (DSL) and cable modems, was more than six times that of the
            year-ago quarter and increased 15 percent sequentially, driven by
            strength in DSL.  DSL revenue grew more than 50 percent
            sequentially.
 
      -- Semiconductor orders were down 42 percent from the year-ago quarter
         and 39 percent sequentially, reflecting weakness across almost all
         product areas.
 
     Semiconductor Highlights
      -- TI unveiled three DSPs that deliver high-speed DSP technology for
         next-generation advances in communications such as third-generation
         (3G) wireless, broadband and imaging.  The devices, which are part of
         TI's TMS320C64x(TM) DSP core introduced last year, combine speed with
         very low power dissipation.
 
      -- TI announced an OMAP(TM) Investment Program to accelerate the creation
         and deployment of next-generation wireless applications.  TI is
         prepared to make equity investments up to $100 million over the next
         12 to 18 months.  Two equity investments already have been announced:
         AuthenTec Inc., a leader in fingerprint authentication integrated
         circuits, and PacketVideo Corporation, a leader in wireless
         multimedia.
 
      -- TI announced the industry's most complete family of DSL communications
         processing solutions for the router and voice over DSL (VoDSL) gateway
         market segments.  The new integrated solutions leverage TI's systems
         expertise, including its programmable DSP and Analog technology,
         Telogy Software(TM) VoDSL products and a new family of DSL
         communications processors with interfaces to all home and office
         networking protocols.
 
      -- TI's TMS320C5510 DSP won the EDN Magazine "Innovation of the Year"
         Award in the DSP category.  The C5510 DSP is the most power-efficient
         of any DSP shipping today.  The C5510 DSP recently topped $200 million
         in design commitments only eight months after its introduction to the
         market.  This is the third award won by the C55x(TM) DSP generation.
         Other recent awards are Microprocessor Report's "Analysts Choice"
         Award and Internet Telephony's "Product of the Year" Award.
 
     Sensors & Controls
      -- Sensors & Controls revenue was $260 million, about even with the year-
         ago quarter.  Sequentially, revenue increased 4 percent due to
         seasonal gains in control products.
 
      -- Operating profit was $51 million, or 19.5 percent of revenue, compared
         with $52 million in the year-ago quarter.  Operating profit increased
         20 percent from $42 million in the fourth quarter of 2000 due to lower
         production costs.
 
     Educational & Productivity Solutions (E&PS)
      -- E&PS revenue was $81 million, compared with $79 million in the year-
         ago quarter.  Sequentially, revenue increased 23 percent as sales
         growth resumed following fourth-quarter inventory adjustments in the
         retail channel.
 
      -- Operating profit was $17 million, or 21.2 percent of revenue, compared
         with $8 million in the year-ago quarter due to higher gross margin.
         Operating profit almost tripled from $6 million in the fourth quarter
         of 2000 primarily due to increased revenue.
 
     Additional Financial Information
      -- During the first quarter of 2001, cash and cash equivalents plus
         short-term investments decreased by $914 million to $3089 million,
         primarily due to capital expenditures.
 
      -- Cash flow from operating activities was $119 million for the quarter.
 
      -- Capital expenditures totaled $900 million in the first quarter of
         2001 versus $647 million in the year-ago quarter.
 
      -- Depreciation for the first quarter of 2001 was $339 million pro forma,
         versus $262 million in the year-ago quarter.
 
      -- At the end of quarter, the debt-to-total-capital ratio was 0.09,
         versus 0.10 at the end of 2000.
 
 
     "Safe Harbor" Statement under the Private Securities Litigation Reform Act
 of 1995:  This release includes "forward-looking statements" intended to
 qualify for the safe harbor from liability established by the Private
 Securities Litigation Reform Act of 1995.  These forward-looking statements
 generally can be identified by phrases such as TI or its management
 "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or
 other words or phrases of similar import.  Similarly, such statements herein
 that describe the company's business strategy, outlook, objectives, plans,
 intentions or goals also are forward-looking statements.  All such forward-
 looking statements are subject to certain risks and uncertainties that could
 cause actual results to differ materially from those in forward-looking
 statements.
     We urge you to carefully consider the following important factors that
 could cause actual results to differ materially from the expectations of the
 company or its management:
 
      -- Market demand for semiconductors, particularly for digital signal
         processors and analog chips in key markets, such as telecommunications
         and computers;
      -- TI's ability to develop, manufacture and market innovative products in
         a rapidly changing technological environment;
      -- TI's ability to compete in products and prices in an intensely
         competitive industry;
      -- TI's ability to maintain and enforce a strong intellectual property
         portfolio and obtain needed licenses from third parties;
      -- Timely completion and successful integration of announced
         acquisitions;
      -- Global economic, social and political conditions in the countries in
         which TI and its customers and suppliers operate, including
         fluctuations in foreign currency exchange rates;
      -- Losses or curtailments of purchases from key customers;
      -- TI's ability to recruit and retain skilled personnel; and
      -- Availability of raw materials and critical manufacturing equipment.
 
     For a more detailed discussion of these factors, see the text under the
 heading "Cautionary Statements Regarding Future Results of Operations" in
 Item 1 of the company's most recent Form 10-K.  The forward-looking statements
 included in this release are made only as of the date of this release and the
 company undertakes no obligation to update the forward-looking statements to
 reflect subsequent events or circumstances.
     Texas Instruments Incorporated is the world leader in digital signal
 processing and analog technologies, the semiconductor engines of the Internet
 age.  The company's businesses also include sensors and controls, and
 educational and productivity solutions.  TI is headquartered in Dallas, Texas,
 and has manufacturing or sales operations in more than 25 countries.
     Texas Instruments is traded on the New York Stock Exchange under the
 symbol TXN.  The company's web site is www.ti.com.
     TI Trademarks:  OMAP
                     Telogy Software
                     C55x
                     TMS320C64x
 
 

SOURCE Texas Instruments Incorporated
    DALLAS, April 17 /PRNewswire/ -- First-quarter financial results for Texas
 Instruments Incorporated (NYSE:   TXN) were impacted by a combination of weak
 electronic end-equipment demand and excess customer inventories, resulting in
 reduced demand for its semiconductor products.  TI's revenue in the quarter
 was $2528 million, down 17 percent sequentially.  Pro forma earnings per share
 (EPS) were $0.18.
     Early in the first quarter, TI began an aggressive cost-reduction plan to
 limit the impact of reduced revenue on profitability.  Actions have included a
 voluntary retirement program, shortened workweeks in some areas, and
 consolidation of certain manufacturing operations.  Overhead costs were
 significantly reduced, maintaining pro forma SG&A (selling, general and
 administrative) expenses at the same percentage of revenue as in the fourth
 quarter.  To further align the company's expenses with near-term revenue
 expectations, TI will lay off about 2,500, or 6 percent, of its employees
 worldwide.  These reductions will begin in the second quarter and the company
 will take associated special charges at that time.  Most of these job
 eliminations are in support functions and manufacturing.  In total, these
 actions are expected to result in annualized savings of approximately
 $400 million when completed.
     "We are in one of the sharpest decelerations that our industry has
 experienced, and it requires that we move fast to make hard but prudent
 business decisions.  The most difficult decisions are layoffs, because they
 affect our people," said Tom Engibous, TI chairman, president and CEO.
 "Despite the short-term market conditions, the long-term megatrends in society
 continue to move toward a networked world of high-speed communications that
 depend on the real-time capabilities of DSP and Analog semiconductors.  The
 economy will get better.  As it does, TI will emerge an even stronger
 competitor."
     Pro forma information excludes certain costs, charges and gains.  For more
 information, see financial statements.
 
     Summary of 1Q01 Financial Results
      -- Revenue for TI was $2528 million, down 8 percent from $2761 million in
         the year-ago quarter, and down 17 percent sequentially due to weakness
         in semiconductor.
 
      -- Pro forma operating profit was $340 million, down from $608 million in
         the year-ago quarter and from $683 million in the fourth quarter of
         2000 due to lower semiconductor revenue.  Pro forma operating margin
         was 13.5 percent, down 8.5 percentage points from the year-ago quarter
         and 9.0 percentage points from the fourth quarter of 2000 due to lower
         semiconductor revenue.
 
      -- Pro forma income for the quarter was $317 million, compared with
         $494 million in the year-ago quarter and $549 million in the fourth
         quarter of 2000.
 
      -- Pro forma EPS decreased to $0.18, down from $0.28 in the first quarter
         of 2000 and $0.31 in the fourth quarter of 2000.
 
      -- Orders in the first quarter were $1898 million, compared with
         $2996 million in the year-ago quarter and $2772 million in the fourth
         quarter of 2000.
 
      -- According to generally accepted accounting principles, for the first
         quarter of 2001:  operating profit was $229 million, compared with
         $554 million in the year-ago quarter; operating margin was
         9.0 percent, compared with 20.0 percent; net income was $230 million,
         compared with $421 million; and diluted EPS decreased to $0.13,
         compared with $0.24.
 
     Outlook
     TI expects revenue to decline about 20 percent sequentially in the second
 quarter as semiconductor customers continue to work through excess inventories
 in an environment in which consumption of their electronic end-equipment
 products continues to be weak.  Due to continuing uncertain economic
 conditions, it is unclear when demand for TI's semiconductor products will
 strengthen.
 
     Specifically, TI expects the following for the second quarter:
      -- Revenue from semiconductor to decline sequentially, with weakness
         affecting almost all product areas;
      -- Revenue from TI's non-semiconductor activities, including Sensors &
         Controls and Educational & Productivity Solutions, to increase
         sequentially, primarily reflecting seasonal retail stocking for back-
         to-school sales of calculators;
      -- Operating margin to decline to about breakeven pro forma as a result
         of lower revenue; and
      -- Non-operating income to decline to about $40 million pro forma.
 
     For 2001, TI expects the following:
      -- Research and development (R&D) of $1.6 billion pro forma, down from
         the prior estimate of $1.7 billion;
      -- Capital expenditures of $1.8 billion, down from the prior estimate of
         $2.0 billion;
      -- Depreciation of $1.5 billion pro forma, unchanged from the prior
         estimate;
      -- Amortization of acquisition-related costs of $240 million; and
      -- A tax rate of 26 percent pro forma, down from the prior estimate of
         31 percent.
 
                          PRO FORMA INCOME INFORMATION
              (In millions of dollars, except per-share amounts.)
 
     Pro forma supplemental income information, which is not prepared in
 accordance with generally accepted accounting principles, excludes
 amortization of acquisition-related costs (goodwill, other intangibles and
 deferred compensation), pooling of interests transaction costs, purchased in-
 process research and development costs, and special charges and gains.  See
 notes to the following tables for details.  The effect of these amounts is
 partially offset, as appropriate, by their allocated profit sharing and income
 tax effects.
 
                                           For Three Months Ended
                                            Mar. 31      Mar. 31
                                               2001         2000
 
     Net revenues                             $2528        $2761
 
     Cost of revenues                          1452         1389
     Research and development                   427          379
     Selling, general and administrative        309          385
 
 
     Profit from operations                     340          608
 
     Other income/interest                       89          107
 
     Income before provision for income taxes   429          715
 
     Provision for income taxes                 112          221
 
 
     Pro forma income                         $ 317        $ 494
 
 
     Pro forma earnings per common share:
         Diluted                             $  .18       $  .28
 
         Basic                               $  .18       $  .29
 
 
                  TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                           Consolidated Income Statement
                (In millions of dollars, except per-share amounts.)
 
 
                                           For Three Months Ended
                                            Mar. 31      Mar. 31
                                               2001         2000
 
     Net revenues                            $2528         $2761
     Operating costs and expenses:
      Cost of revenues                        1505          1420
      Research and development                 446           386
      Selling, general and administrative      348           401
 
       Total costs of operations              2299          2207
 
 
     Profit from operations                    229           554
     Other income (expense) net                107           128
     Interest on loans                          16            21
 
 
     Income before provision for income
      taxes and cumulative effect of an
      accounting change                        320           661
     Provision for income taxes                 90           211
 
     Income before cumulative effect of an
      accounting change                        230           450
     Cumulative effect of an accounting
      change                                   ---           (29)
 
 
     Net income*                            $  230        $  421
 
 
     Diluted earnings per common share**:
       Income before cumulative effect of
        an accounting change                $  .13        $  .25
       Cumulative effect of an accounting
        change                                 ---          (.01)
 
       Net income                           $  .13        $  .24
 
     Basic earnings per common share:
       Income before cumulative effect of
        an accounting change                $  .13        $  .26
       Cumulative effect of an accounting
        change                                 ---          (.01)
 
       Net income                           $  .13        $  .25
 
     Cash dividends declared per share
      of common stock                       $ .021        $ .021
 
 
     * Income for the first quarter of 2001 includes, in millions of dollars,
       net special charges of $50, of which $11 is severance cost for first
       quarter employee acceptances under the U.S. voluntary retirement program
       (which covers the corporate, semiconductor and sensors & controls
       activities and expired April 16, 2001), $16 is severance cost for
       restructuring actions in international semiconductor locations, mostly
       in Germany, and $25 relates to the fourth quarter 2001 closing of a
       semiconductor manufacturing facility in Santa Cruz, California.  Of the
       $25, $16 is for severance cost and $5 is for acceleration of
       depreciation over the remaining service life of the facility.  Of the
       $50 net special charges, $44 is an increase in cost of revenues, $7 in
       selling, general and administrative expense, $2 in research and
       development expense, and $3 in other income.  Income for the first
       quarter of 2000 includes, in millions of dollars, special charges of
       $29 associated with actions including the closing of the sensors &
       controls manufacturing facility in Versailles, Kentucky, and TI's
       acquisition of Toccata Technology ApS.  Of the $29, $20 is included in
       cost of revenues, $6 in selling, general and administrative expense, and
       $3 in research and development expense.
 
       Income includes, in millions of dollars, acquisition-related
       amortization of $59 and $25 for the first quarters of 2001 and 2000.
 
     ** Diluted earnings per common share are based on average common and
        dilutive potential common shares outstanding (1785.4 million shares and
        1782.0 million shares for the first quarters of 2001 and 2000).
 
 
                TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                           Consolidated Balance Sheet
              (In millions of dollars, except per-share amounts.)
 
                                            Mar. 31        Dec. 31
                                               2001           2000
 
     Assets
     Current assets:
       Cash and cash equivalents          $     304        $   745
       Short-term investments                  2785           3258
       Accounts receivable, less
        allowance for losses of
        $63 million in 2001 and
        $54 million in 2000                    1948           2204
       Inventories:
         Raw materials                          218            245
         Work in process                        678            681
         Finished goods                         284            307
 
           Inventories                         1180           1233
 
 
       Prepaid expenses                         140             80
       Deferred income taxes                    547            595
 
         Total current assets                  6904           8115
 
     Property, plant and equipment at cost     9702           9099
       Less accumulated depreciation          (3709)         (3652)
 
         Property, plant and equipment (net)   5993           5447
 
     Investments                               2661           2400
     Goodwill and other acquisition-related
      intangibles                               874            961
     Deferred income taxes                      116            106
     Other assets                               694            691
 
     Total assets                            $17242         $17720
 
 
     Liabilities and Stockholders' Equity
     Current liabilities:
       Loans payable and current portion
        long-term debt                       $   46         $  148
       Accounts payable                         795            997
       Accrued and other current liabilities   1042           1668
 
         Total current liabilities             1883           2813
 
 
     Long-term debt                            1228           1216
     Accrued retirement costs                   356            378
     Deferred income taxes                      495            469
     Deferred credits and other liabilities     278            256
 
     Stockholders' equity:
       Preferred stock, $25 par value.
        Authorized - 10,000,000 shares
        Participating cumulative preferred.
        None issued                             ---            ---
       Common stock, $1 par value.
        Authorized - 2,400,000,000 shares
        Shares issued:  2001 - 1,737,306,923;
        2000 - 1,733,237,248                   1737           1733
       Paid-in capital                         1249           1185
       Retained earnings                       9517           9323
       Less treasury common stock at cost.
        Shares:  2001 - 1,322,496;
        2000 - 1,184,880                        (96)           (93)
       Accumulated other comprehensive income   718            574
       Deferred compensation                   (123)          (134)
         Total stockholders' equity           13002          12588
 
     Total liabilities and stockholders'
      equity                                 $17242         $17720
 
 
                TEXAS INSTRUMENTS INCORPORATED AND SUBSIDIARIES
                            Statement of Cash Flows
                            (In millions of dollars)
 
                                                   For Three Months Ended
                                                     Mar. 31    Mar. 31
                                                        2001       2000
 
          Cash flows from operating activities:
           Income before cumulative effect of
            an accounting change                      $  230     $  450
           Depreciation                                  344        262
           Amortization of acquisition-related costs      59         25
           Deferred income taxes                          21         29
           Net currency exchange losses                    1          1
           (Increase) decrease in working capital
            (excluding cash and cash equivalents,
            short-term investments, deferred income
            taxes, and loans payable and current
            portion long-term debt):
              Accounts receivable                        234        (10)
              Inventories                                 54       (133)
              Prepaid expenses                           (61)       (15)
              Accounts payable and accrued expenses     (343)        90
              Income taxes payable                       (81)        (7)
              Accrued retirement and profit sharing
               contributions                            (371)      (192)
           Increase (decrease) in noncurrent
            accrued retirement costs                      (9)         4
           Other                                          41         (3)
 
          Net cash provided by operating activities      119        501
 
          Cash flows from investing activities:
            Additions to property, plant and equipment  (900)      (647)
            Purchases of short-term investments         (527)      (968)
            Sales and maturities of short-term
             investments                                1002       1209
            Purchases of noncurrent investments          (48)       (43)
            Sales of noncurrent investments               33         54
 
          Net cash used in investing activities         (440)      (395)
 
          Cash flows from financing activities:
            Payments on loans payable                    ---         (2)
            Additions to long-term debt                    3        243
            Payments on long-term debt                  (108)       (29)
            Dividends paid on common stock               (37)       (35)
            Sales and other common stock transactions     42         94
               Common stock repurchase program            (7)       (66)
 
          Net cash provided by (used in) financing
           activities                                   (107)       205
 
          Effect of exchange rate changes on cash        (13)       (18)
 
          Net increase (decrease) in cash and cash
           equivalents                                  (441)       293
          Cash and cash equivalents, January 1           745        781
 
          Cash and cash equivalents, March 31         $  304      $1074
 
 
                         BUSINESS SEGMENT NET REVENUES
                            (In millions of dollars)
 
 
                                                   For Three Months Ended
                                                     Mar. 31    Mar. 31
                                                        2001       2000
 
     Semiconductor
       Trade                                           $2172      $2382
       Intersegment                                        4          5
 
                                                        2176       2387
 
     Sensors & Controls
       Trade                                             260        264
       Intersegment                                      ---        ---
 
                                                         260        264
 
     Educational & Productivity Solutions
       Trade                                              81         79
 
     Corporate activities                                 (2)         2
     Divested activities                                  13         29
 
     Total net revenues                                $2528      $2761
 
 
 
                           BUSINESS SEGMENT PROFIT (LOSS)
                              (In millions of dollars)
 
 
                                                   For Three Months Ended
                                                     Mar. 31    Mar. 31
                                                        2001       2000
 
 
     Semiconductor                                      $304       $612
     Sensors & Controls                                   51         52
     Educational & Productivity Solutions                 17          8
     Corporate activities                                (38)       (70)
     Special charges/gains and acquisition-
      related amortization, net of applicable
      profit sharing                                    (109)       (54)
     Interest on loans/other income (expense)
      net, excluding a first-quarter 2001 gain of
      $3 million, included above in special
      charges/gains and acquisition-related
      amortization                                        89        107
     Divested activities                                   6          6
 
     Income before provision for income
       taxes and cumulative effect of an
       accounting change                                $320       $661
 
 
     Semiconductor
      -- Semiconductor revenue in the first quarter was $2176 million, down
         from $2387 million in the same period in 2000 and $2695 million in the
         fourth quarter of 2000 due to weak demand across a breadth of
         products.
 
      -- Semiconductor operating profit for the first quarter was $304 million,
         or 14.0 percent of revenue, compared with $612 million in the year-ago
         period and $679 million in the fourth quarter of 2000, primarily due
         to reduced product revenue and, to a lesser extent, lower royalties.
 
      -- Analog revenue was up 2 percent from the year-ago period and declined
         17 percent sequentially.  DSP revenue decreased 28 percent from the
         same quarter a year ago and 21 percent sequentially.  Analog and DSP
         comprised about 65 percent of TI's semiconductor revenue.
 
      -- TI's remaining semiconductor revenue decreased from the year-ago
         quarter and from the fourth quarter of 2000.
 
      -- TI's semiconductor revenue in key markets was as follows:
 
         -- Wireless revenue declined 34 percent compared with the year-ago
            quarter and 25 percent sequentially.
         -- Revenue from TI's catalog products, which includes DSP and high-
            performance Analog, increased 4 percent from the year-ago quarter
            and declined 15 percent sequentially.
         -- Broadband communications revenue, which includes digital subscriber
            lines (DSL) and cable modems, was more than six times that of the
            year-ago quarter and increased 15 percent sequentially, driven by
            strength in DSL.  DSL revenue grew more than 50 percent
            sequentially.
 
      -- Semiconductor orders were down 42 percent from the year-ago quarter
         and 39 percent sequentially, reflecting weakness across almost all
         product areas.
 
     Semiconductor Highlights
      -- TI unveiled three DSPs that deliver high-speed DSP technology for
         next-generation advances in communications such as third-generation
         (3G) wireless, broadband and imaging.  The devices, which are part of
         TI's TMS320C64x(TM) DSP core introduced last year, combine speed with
         very low power dissipation.
 
      -- TI announced an OMAP(TM) Investment Program to accelerate the creation
         and deployment of next-generation wireless applications.  TI is
         prepared to make equity investments up to $100 million over the next
         12 to 18 months.  Two equity investments already have been announced:
         AuthenTec Inc., a leader in fingerprint authentication integrated
         circuits, and PacketVideo Corporation, a leader in wireless
         multimedia.
 
      -- TI announced the industry's most complete family of DSL communications
         processing solutions for the router and voice over DSL (VoDSL) gateway
         market segments.  The new integrated solutions leverage TI's systems
         expertise, including its programmable DSP and Analog technology,
         Telogy Software(TM) VoDSL products and a new family of DSL
         communications processors with interfaces to all home and office
         networking protocols.
 
      -- TI's TMS320C5510 DSP won the EDN Magazine "Innovation of the Year"
         Award in the DSP category.  The C5510 DSP is the most power-efficient
         of any DSP shipping today.  The C5510 DSP recently topped $200 million
         in design commitments only eight months after its introduction to the
         market.  This is the third award won by the C55x(TM) DSP generation.
         Other recent awards are Microprocessor Report's "Analysts Choice"
         Award and Internet Telephony's "Product of the Year" Award.
 
     Sensors & Controls
      -- Sensors & Controls revenue was $260 million, about even with the year-
         ago quarter.  Sequentially, revenue increased 4 percent due to
         seasonal gains in control products.
 
      -- Operating profit was $51 million, or 19.5 percent of revenue, compared
         with $52 million in the year-ago quarter.  Operating profit increased
         20 percent from $42 million in the fourth quarter of 2000 due to lower
         production costs.
 
     Educational & Productivity Solutions (E&PS)
      -- E&PS revenue was $81 million, compared with $79 million in the year-
         ago quarter.  Sequentially, revenue increased 23 percent as sales
         growth resumed following fourth-quarter inventory adjustments in the
         retail channel.
 
      -- Operating profit was $17 million, or 21.2 percent of revenue, compared
         with $8 million in the year-ago quarter due to higher gross margin.
         Operating profit almost tripled from $6 million in the fourth quarter
         of 2000 primarily due to increased revenue.
 
     Additional Financial Information
      -- During the first quarter of 2001, cash and cash equivalents plus
         short-term investments decreased by $914 million to $3089 million,
         primarily due to capital expenditures.
 
      -- Cash flow from operating activities was $119 million for the quarter.
 
      -- Capital expenditures totaled $900 million in the first quarter of
         2001 versus $647 million in the year-ago quarter.
 
      -- Depreciation for the first quarter of 2001 was $339 million pro forma,
         versus $262 million in the year-ago quarter.
 
      -- At the end of quarter, the debt-to-total-capital ratio was 0.09,
         versus 0.10 at the end of 2000.
 
 
     "Safe Harbor" Statement under the Private Securities Litigation Reform Act
 of 1995:  This release includes "forward-looking statements" intended to
 qualify for the safe harbor from liability established by the Private
 Securities Litigation Reform Act of 1995.  These forward-looking statements
 generally can be identified by phrases such as TI or its management
 "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or
 other words or phrases of similar import.  Similarly, such statements herein
 that describe the company's business strategy, outlook, objectives, plans,
 intentions or goals also are forward-looking statements.  All such forward-
 looking statements are subject to certain risks and uncertainties that could
 cause actual results to differ materially from those in forward-looking
 statements.
     We urge you to carefully consider the following important factors that
 could cause actual results to differ materially from the expectations of the
 company or its management:
 
      -- Market demand for semiconductors, particularly for digital signal
         processors and analog chips in key markets, such as telecommunications
         and computers;
      -- TI's ability to develop, manufacture and market innovative products in
         a rapidly changing technological environment;
      -- TI's ability to compete in products and prices in an intensely
         competitive industry;
      -- TI's ability to maintain and enforce a strong intellectual property
         portfolio and obtain needed licenses from third parties;
      -- Timely completion and successful integration of announced
         acquisitions;
      -- Global economic, social and political conditions in the countries in
         which TI and its customers and suppliers operate, including
         fluctuations in foreign currency exchange rates;
      -- Losses or curtailments of purchases from key customers;
      -- TI's ability to recruit and retain skilled personnel; and
      -- Availability of raw materials and critical manufacturing equipment.
 
     For a more detailed discussion of these factors, see the text under the
 heading "Cautionary Statements Regarding Future Results of Operations" in
 Item 1 of the company's most recent Form 10-K.  The forward-looking statements
 included in this release are made only as of the date of this release and the
 company undertakes no obligation to update the forward-looking statements to
 reflect subsequent events or circumstances.
     Texas Instruments Incorporated is the world leader in digital signal
 processing and analog technologies, the semiconductor engines of the Internet
 age.  The company's businesses also include sensors and controls, and
 educational and productivity solutions.  TI is headquartered in Dallas, Texas,
 and has manufacturing or sales operations in more than 25 countries.
     Texas Instruments is traded on the New York Stock Exchange under the
 symbol TXN.  The company's web site is www.ti.com.
     TI Trademarks:  OMAP
                     Telogy Software
                     C55x
                     TMS320C64x
 
 SOURCE  Texas Instruments Incorporated

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