Microchip Technology Inc

NASDAQ:MCHPUnited States

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• DJ Texas Instruments Won't Be Messed With Easily -- WSJ, from 1 hour ago by Dow Jones

  1 hour ago by Dow Jones
  Companies Mentioned: MCHP, TXN, ADI
  By Dan Gallagher A well-known activist investor wants Texas Instruments to make a relatively mild course correction. Wall Street doesnt think the chipmaker will give an inch. TIs shares barely budged Monday after Elliott Investment Management announced a $2.5 billion investment in the company, along with a plan to improve projected free cash flow. The stock then fell nearly 2% by midday Tuesday, after analysts cast doubt on whether the campaign would be successful. We remain unconvinced that Elliotts case will drive substantial changes to TIs strategy at this point, wrote Stacy Rasgon of Bernstein. Fundamentally, TI has historically been one of the best stewards of capital in the semiconductor sector, wrote Ross Seymore of Deutsche Bank. Elliotts ask is relatively mild, at least relative to some of the activists past campaigns, such as last years effort to get wireless tower operator Crown Castle to replace its CEO. Elliott is calling for TI to adopt a more flexible capital spending plan than the one it first outlined in 2022, and then raised the following year. The latter calls for TI to spend $5 billion annually through 2026more than three times its average over the last five years. Elliott suggests a dynamic capacity-management approach that could cut that amount to $2.75 billion in 2026 by not fully equipping new chip fabrication facilities, unless demand warrants it. Free cash flow has long been Texas Instruments true North Star. We believe that the growth of free cash flow per share is the primary driver of long-term value, is a line thats been repeated almost verbatim at the beginning of the companys annual capital management call for the past four years. Hence, the companys ambitious plan to expand its production capacity has unnerved its shareholders. The stock has gotten a nice bump over the last month on signs that the harsh downturn for analog chip makers may be reaching a bottom. But TI has significantly lagged peers such as Analog Devices and Microchip as well as the broader market over the last two years, and the companys spending plan means that could continue over the next two. While we think TI's strategy will provide strong benefits in 2027+ once capex finally declines, we continue to believe the setup remains difficult into CY25, Chris Caso of Wolfe Research wrote to clients last month. Elliott is betting investors wont be that patient. This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage). (END) Dow Jones Newswires May 29, 2024 13:15 ET (17:15 GMT)