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Hold The Chips: Texas Instruments Says Inventories Too Low

Analysts said update confirms that overstocked inventories hampering the chip industry the past few quarters have mostly cleared.

NEW YORK (AP) - After nearly a year of swollen inventories, Texas Instruments Inc. said late Monday the chip industry may now be suffering from the opposite problem; under-stocked warehouses.
 
The Dallas-based company, that makes chips that power cell phones and other products, narrowed its profit and sales forecast for the second quarter on Monday. Analysts said the update confirms the overstocked inventories hampering the chip industry the past few quarters have mostly cleared.
 
Texas Instruments now says customers are managing their inventories very carefully to avoid buying too many chips. In some cases, they are managing inventories too carefully, said Ron Slaymker, vice president and manager of investor relations.
 
''We'll just have to see whether they could have it exactly right or they could have it tight,'' he said in a conference call. ''We'll just have to see how demand rolls out over time.''
 
Lean customer inventories are a much more benign headache than inventories that are oversupplied. When customers have too many chips, they hold off on new orders so they can clear the products they already have.
 
When customers allow inventories to dwindle, Texas Instruments has less visibility into future orders and its business backlog.
 
The company now expects sales of $3.36 billion to $3.51 billion, compared with the previous forecast of $3.32 billion to $3.6 billion.
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