Texas Instruments 2006 Annual Report Download - page 51

TEXAS INSTRUMENTS 2006 ANNUAL REPORT 4949
Including the effect of the discrete tax items recognized during 2005, the overall tax rate was 21 percent compared with
22 percent in 2004. The lower tax rate in 2005 was the result of the discrete tax items recognized during the year, partially
offset by the impact of the increase in income before income taxes.
For the year, income from continuing operations was $2.17 billion, or $1.30 per share, an increase of 29 percent compared with
2004 income from continuing operations of $1.69 billion, or $0.96 per share.
For the year, net income, which includes income from continuing operations and discontinued operations, was $2.32 billion,
or $1.39 per share, an increase of 25 percent compared with 2004 net income of $1.86 billion, or $1.05 per share. Earnings per
share growth of 32 percent in 2005 exceeded net income growth, reflecting a net decline of about 100 million shares in the
average diluted shares outstanding primarily resulting from our stock repurchase program.
For the year, our orders of $12.84 billion increased 13 percent as demand grew for our Semiconductor products.
Semiconductor orders increased 13 percent to $12.34 billion due to broad-based demand for our DSP and analog products.
Semiconductor Segment
Statement of Operations – Semiconductor
FOR THE YEARS ENDED
DECEMBER 31,
2005 2004
Net revenue.......................................................................... $11,829 $11,034
Cost of revenue....................................................................... 6,056 6,026
Gross profit.......................................................................... 5,773 5,008
Gross profit % of revenue............................................................ 48.8% 45.4%
Profit from operations................................................................. 2,808 2,068
Operating profit % of revenue........................................................ 23.7% 18.7%
Semiconductor revenue in 2005 of $11.83 billion increased 7 percent from 2004 primarily due to increased shipments resulting
from higher demand for wireless products and, to a lesser extent, increased shipments from higher demand for high-
performance analog products.
For the year, wireless revenue grew 14 percent, with success in both the fast-growing 3G WCDMA (Wideband Code-
Division Multiple Access) market, and in supplying chips to the rapidly growing emerging market for low-price cell phones.
Industry shipments of WCDMA cell phones doubled in 2005. In 2005, about 55 percent of our 3G revenue came from sales of
OMAP™ application processors and about 45 percent from sales of digital baseband modems. (OMAP processors are high-
performance processors that enable multimedia applications in cell phones and other electronic devices.)
For the year, high-performance analog revenue grew 13 percent, reflecting the combination of four consecutive quarters
of solid growth and the inventory correction that was underway at our distributors at the end of 2004. We exited 2005 with
distribution inventory levels of our high-performance analog products lower than they were at the end of 2004, despite resales
that were significantly higher.
Analog revenue increased 4 percent from 2004 primarily due to increased shipments resulting from growth in demand for
high-performance analog products, which more than offset the loss of revenue from our commodity liquid crystal display
(LCD) driver product line, which we divested in the first quarter of 2005. In 2005, about 40 percent of total Semiconductor
revenue came from analog.
DSP revenue increased 15 percent from 2004 primarily due to increased shipments resulting from growth in demand for
wireless products. In 2005, about 40 percent of total Semiconductor revenue came from DSP.
For the year, remaining Semiconductor revenue increased 2 percent from 2004 primarily due to higher shipments resulting
from increased demand for RISC microprocessors and microcontrollers that offset a decline in revenue from DLP products.
We began 2005 with excess inventories of DLP products at both our customers and their channels. Overall DLP revenue
declined 8 percent in 2005. We left the year in a much better position, with revenue in the fourth quarter up 10 percent from
the year-ago quarter. In 2005, DLP was about 5 percent of Semiconductor revenue, while RISC microprocessors, standard
logic, microcontrollers and royalties were under 5 percent each.