Texas Instruments Inc. (NYSE: TXN) wants to add $1 billion to its war chest via a debt offering, and it may use some of the funds to strengthen itself for future acquisitions.
The company said in a press release that it wants to use the net proceeds "for general corporate purposes which, among other things, could include repurchases of common stock." That catch-all phrase could involve more than just buying back shares. It may extend to acquisitions and property and equipment funding.
In my opinion, TI is taking advantage of the extremely favorable borrowing climate to add firepower for bite-size acquisitions in the semiconductor area that would complement its product portfolio. The company is known for making strategic acquisitions of plants and equipment during market slowdowns or when other industry players want to raise funds or simply shift manufacturing to foundry wafer vendors.
The planned offering will substantially raise TI's cash and short-term investment balance, which stood at $2.33 billion at the end of June. Its long-term debt fell from $4.2 billion at the end of March to $2.7 billion at the end of June.
The offering is certainly not going to hurt TI's credit rating. Standard & Poor’s said in an email that it "assigned its 'A+' issue rating" to the planned senior unsecured notes, and that the company can easily "accommodate the transaction." The agency also said TI's leverage will swing up only to "about 1.5x from 1.2x as of June 30, 2012."
I believe the analog IC and DSP company would be well positioned to raise more money if necessary. Standard & Poor's said its "$1.5 billion of debt maturing in May 2013, will be repaid, and that adjusted leverage should revert below 1.5x over the near term."
Ashish, You know the US has in the past granted company a "one-time" opportunity to repatriate foreign cash. I remember writing about it at the time because Microsoft used that opportunity to pay shareholders a special dividend that totalled $30 billion. Cisco also brought back some cash and so did many other American companies.
What happened afterward? The companies began piling up cash overseas again. If the government agrees with your suggestion we'll start the cycle all over again. This time they should close the loophole or stop double taxation. If the money was earned overseas and had been taxed overseas don't tax it again at home until somebody goes out to splurge on themselves!
"I am very much in favor of a One-time Tax Holiday which permits most US Headquartered Companies to bring back most of their Overseas profits back to the US"
@Ashish: I think that may be a good move but can this be a good move in the long-run? Given how easy it is for companies to shift cash around, what happens when the tax holiday ends? Do they look to take out the investment again to other countries? If that happens, it may end up hurting the economy more.
I am afraid I don't have much knowledge on that issue.
You do realize though that some of TIs biggest competitors are based in Europe and Japan;so investor considerations are different there?
I was just reading Infineon's latest results and they remain very hopeful for the rest of 2012-13.
The consumer is holding up remarkably well(even in Austerity plagued Europe);while Government and Corporate Spending has slowed down dramatically this year.
Where are the synergies?Those kind of Games are very common In Countries like China& India (where Company onwers tend to use Cash from Profitable enterprises to bail out loss making entities-often with disastrous consequences for all concerned and especially retail shareholders);but I have'nt heard many such major cases here in America.
TIs Numbers are not as massive as the rest of the Giants;but they still have plenty of Cash held Offshore ;which could easily be repatriated back to the US if Tax Conditions were favorable.
I am very much in favor of a One-time Tax Holiday which permits most US Headquartered Companies to bring back most of their Overseas profits back to the US.
Its a one-stroke way to reduce America's Budget and Trade Deficits and permits us to run a relatively loose Fiscal policy for a longer stretch of time(until The Economy Heals better after what happened in 2008).
Too bad same thing is set to happen again in 2012-2013 also.
But then as they say-Politics always Trumps Economics.we are heading for a massive Debt Ceiling induced crash as well as a Fiscal Cliff here in America.
It is better to compare TI against other analog companies than the likes of Apple and MSFT and Google. Better gauges are Maxim, Infineon, STM, LinearTech etc. In terms of 1.2 or 1.5x leverage, what is the consensus on reasonable levels for a major analog IC company?
Ashish, You picked the wrong company though your point is very valid. Texas Instruments cash may be in some foreign account but I doubt the company has a great deal of loot anywhere. It's not TI that should be the focus of such a discussion because it just relatively speaking doesn't rank that high in the group of cash-rich technology companies.
Here are the numbers, which you are may be aware of but humor me while I restate them here: Apple ($117.2 billion in cash, short-term and long-term investments); Microsoft ($72.8 billion); Google ($44.2 billion); Intel ($14.8 billion.) TI doesn't even rate a mention.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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