Risk bearing investors do not have to test the waters of Texas Instruments Inc.(NASDAQ:TXN) given its steady earnings. However, that does not mean that they have to turn a tangent altogether. Kevin March, company CFO and Dave Pahl, Chief Investor Relations helped shed light on the technical and financial aspects of the company’s conference call for its Q4.
In its conference call, Texas Instruments Inc.(NASDAQ:TXN) reported that it was able to reduce weeks of inventory through its consignment program. The electronics company was able to reap 60% of its distribution revenue through consignment which was 15 percent points more than what it could make from the previous year.
The consignment program provides the company with inventory on its balance sheet as revenue is recognized when distributors order from it. Texas Instruments Inc.(NASDAQ:TXN) stated that by doing this, the company will decrease the impact from changes in its distribution channel to a minimum and thus give more flexibility to cater customer demands.
However, this method is definitely making the company’s inventory levels look bloated. This may in turn cause watchful investors to protest the activity.
Another plus point that the company highlighted in its conference call was that China proved to be a very good opportunity for the company even with the amount of competitive pressure it held. Texas Instruments Inc.(NASDAQ:TXN)’sKevin March states that the company looks forward to work in China, the way it does in other parts of the world.
Texas Instruments Inc.(NASDAQ:TXN) already reaps 42% of its total revenues through its consumers in Hong Kong and China which is probably because placing the distribution and chip-building centers close to the device manufacturing plant builds orders relatively quickly, thus targeting more consumers in a shorter amount of time.
The company also reported the slight change in its book-to-bill ratio for its yearly basis. The current quarter came off with 0.97 with last year being 0.94. However, March also stated that the book-to- bill may not mean anything sufficient given the fact that orders are coming more through consignment rather than the traditional method.
March wanted investors to know how its strategic investments have been playing a key role in the company’s performance. He stated that the investments that he had made back in 2010 to 2011 were paying off after nine quarters or so. These investments are said to have longer term presence on shelves which the company has forecasted.
Embedded revenues of the company increased 11% on a yearly basis with operating margins doubling in the same term. March is expecting the continued rise of margins with growth in the company’s embedded revenues as well.
All these factors that March stated in Texas Instruments Inc.(NASDAQ:TXN) conference call state why it is a good buy for investors. Therefore keeping in mind the company’s future prospects, investors may want to hold the stock before its share price rises due to all the added efforts Texas Instruments Inc.(NASDAQ:TXN) has put in.
