Texas Instruments OMAP Focus Shifting to Embedded

Reuters reports that Texas Instruments (TI) revealed during an investor call a shift in focus to a broader market that will include industrial clients like car manufacturers. TI is reportedly hoping for a more profitable and stable business by taking this approach rather than continue to lose ground in the smartphone/tablet mobilw sector.

TI has reportedly fallen behind in the smartphone and tablet sectors as Qualcomm solutions have become more popular, and former clients like Apple and Samsung are producing their own chips. Despite the shift in focus, TI told investors that it does not plan to abandon its current customers like Amazon and Barnes & Noble. However its mobile application chip business doesn't have plans to support future products.

"We believe that opportunity is less attractive as we go forward," Greg Delagi, senior vice president for embedded processing, said during a webcast of the meeting.

TI shares dropped more than 3-percent on Tuesday after the investor meeting due to worries about the company's revenue prospects, as the chip maker did not go into detail about how the change would affect its financial results. Investors were left wondering when revenue stemming from smartphones and tablets would start to disappear, and how it will be replaced.

"TI made it very clear they no longer want to be in the business of proving application processors for smartphones or tablets," said Longbow Research analyst JoAnne Feeney. "What remains uncertain is for how long they'll support customers."

The company recently branched out with its OMAP line by entering the embedded chip business which includes industrial customers. Delagi said growth in this sector will be slower than what the company experienced in the mobile sector, but it should generate "a more stable, profitable long-term business."

So far it's too early to reveal specifics as to how the move to embedded would affect TI's financials as the company is still working on changing its business, Delagi said.

UPDATE 1
Texas Instruments sent in the following statement regarding its position on the tablet and smartphone market:

"As communicated in last week’s investor event, the smartphone market has become a less attractive long-term opportunity for TI’s OMAP products, primarily due to vertical integration and market consolidation.  However, TI remains committed to the OMAP platform and its customers. The team is not “leaving the mobile industry for good,” and will not leave current mobile customers. Though TI is accelerating the expansion of OMAP processors into a broader set of embedded applications, the team remains dedicated to advancing current mobile customers’ OMAP processor-based product lines."

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