Texas Instruments 2008 Annual Report Download - page 2

To our shareholders
Richard K. Templeton
Chairman, President and
Chief Executive Officer
It would be easy to dismiss 2008 as a difficult year in an impossible
economy. At the macro level, the world is in uncharted financial territory.
Banks are being revamped. Consumer confidence has evaporated. Home
values and stock markets have tumbled. And no one can predict when
recovery will happen.
Against this backdrop, TI has experienced its share of challenges.
We’ve seen declines in our revenue, our profit and our shareholder value.
But as challenging as this may be, it is not the whole story.
I believe when we look back at 2008, we will find it was a game-
changing year in our company’s history. The strategic decisions we
made and are now implementing will once again reshape this company.
With these decisions, we shifted our attention from where our growth
has been in the past to where our growth will be in the future. It’s a
transition we have made successfully many times before as we moved
into better product areas that enhance our long-term performance and
shareholder value.
Specifically, our actions ensure that TI will be grounded in Analog and
Embedded Processing. These are our core businesses. Both are large,
fragmented markets, giving us ample opportunity to gain share. Both
have a proven track record of growth and profitability. And perhaps most
important for us, we have in both the technology and customer relation-
ships to grow faster than our competitors.
We’re also developing closer relationships with customers where
they live. There’s little doubt that the biggest geographic drivers of future
growth will be emerging economies such as China, India, Eastern Europe
and Southeast Asia. We have rapidly expanded our sales teams in these
regions and in 2008 opened more than 10 new sales offices, including
five in India, two each in China and Vietnam, and one each in Poland,
Russia and Thailand.
The pace at which technology transforms lives is only accelerating.
Electronic systems that drive future growth will be different from those of
today. In some, like smart utility metering or capsule-sized cameras that
can be swallowed for medical diagnostics, an existing application will
evolve to become more intelligent and more efficient. In others, like
sensors that are powered with ambient energy for early detection of
forest fires, brand new applications will be born.
To address these opportunities, we have created growth initiatives by
forming small teams of marketers and technologists to focus on targeted
applications. The possibilities are in the thousands, and we’re just getting
started. We also opened Kilby Labs, where researchers and engineers can
dream big and conduct early-stage experiments to determine the viability
of new ideas. The first teams have just started their work there.
Perhaps no decision in 2008 was more significant than the changes
we made in our Wireless business. Wireless was a big factor in TI’s
past success, but we recognize this is a changing market. With sales
of cell phones exceeding 1 billion units a year and subscribers topping
4 billion, growth is now slowing. We believe this slowdown in growth,
along with more standardized functionality and intense competition, will
translate into a commoditized market for certain chips and lower returns
than before. As a result, we chose to reduce our Wireless investments in
standardized modems, and focus instead on applications processors for
the fast-growing smartphone market. We have a leading position in this
area with our OMAP™ processors, and it is not likely to commoditize
anytime soon given the proliferation of cool features on the way.
As we enter 2009, we are taking change seriously. Certainly, this
economy is challenging. But at TI we believe it gives us an opportunity
to move faster and become stronger. We know where we’re going with
Analog and Embedded Processing as our core, and we have the people,
technology and financial strength to get there. We believe the company
that will emerge on the other side of this global downturn will be more
growth-oriented, more customer-focused and more profitable than
ever before.
About TI
Texas Instruments (NYSE: TXN) helps customers solve problems and develop new electronics that make the world smarter, healthier, safer,
greener and more fun. A global semiconductor company, TI innovates through design, sales and manufacturing operations in more than 30
countries. For more information, go to www.ti.com.