Texas Instruments has sold its Sensors and Controls business.
The sale gives Texas Instruments (TI) the war chest to play a major part in the expected consolidation of the chip sector. Royal Philips Electronics announced in December that it was to spin out its $5.7 billion-a-year semiconductor operation to take part in what it saw as a flurry of mergers in the sector.
As one of the big three suppliers, with Intel and Samsung Electronics, TI is in a strong position to snap up one of more of the many smaller vendors to strengthen its operations.
TI was careful to exclude from the sale of Sensors & Controls (S&C) its $120 million-a-year RFID operation, which, although operating on low margins because of the R&D spend needed by a young business, is expected to achieve high revenue growth in future years.
With a compound growth rate of 7% against 17% for its semiconductor business, S&C has become a drag on TI’s expansion and its operating margins were falling against that of the chip business.
S&C has revenue of more than $1 billion a year, about 10% of TI’s total. It supplies the appliance, climate control, industrial, automotive, lighting, and aircraft markets.
S&C contributes between $0.02 and $0.03 to TI’s quarterly earnings, considerably more than the interest the company will earn of the cash from its sale, suggesting that it will look for a profitable acquisition to make up the difference.
TI said the agreement was about unlocking value and that the company will intensify its focus on its high-growth core digital signal processing and analog semiconductor opportunities.
Meanwhile, TI VP and investor relations manager Ron Slaymaker would not say whether the company would follow up the S&C sale with the disposal of another fringe activity, its calculator business, which generates about 5% of revenue. However, he did point out that it is highly profitable, with margins of more than 40%.
