Morningstar | TI Goes Back to the Drawing Board on its CEO Transition as Templeton Returns to the Role
We will maintain our $97 fair value estimate for wide-moat Texas Instruments as the firm announced the resignation of CEO Brian Crutcher, who obtained the role only a month-and-a-half ago, citing violations of the company's code of conduct. Former CEO and current Chairman Rich Templeton will return to the president and CEO roles on an ongoing, indefinite basis, and TI noted that Templeton's appointment is not temporary and that the board is not seeking an immediate replacement. We will maintain our Exemplary stewardship rating for TI as we think Templeton's return to the CEO role will immediately stabilize the firm's operations, and we don't anticipate any disruption to the firm's operations due to the CEO change. We viewed Crutcher as the heir apparent to Templeton as he became senior VP at TI in 2010, executive VP in 2014 and COO in 2017 before taking over as CEO on June 1. We now think that TI will likely need to go deeper into its bench to find a future replacement for Templeton.Additionally, TI announced second-quarter revenue of $4.02 billion and earnings per share of $1.40, both of which were modestly ahead of our expectations. Revenue was at the high end of the firm's previous guidance of $3.78 billion-$4.10 billion as discussed in April. EPS exceeded the high end of the firm's range of $1.19-$1.39, although the firm noted that $0.03 of EPS came from a discrete tax benefit not incorporated into the firm's original guidance. TI will provide full second-quarter results and third-quarter guidance on July 24, at which time we expect to update our valuation model.
Texas Instruments designs and makes semiconductors that it sells to electronics designers and manufacturers. The company has two reportable segments: Analog and Embedded Processing. The company's analog semiconductors change signals, such as sound, temperature, pressure or images to a stream of digital data. The company's analog segment primary product lines includes: power, signal chain, and high volume. The company's embedded processors are designed to handle specific tasks and can be optimized for various combinations of performance, power and cost, depending on the application. The company's embedded processing segment primary product lines includes: connected microcontrollers and processors.
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