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TO OUR SHAREHOLDERS
All of us at Texas Instruments look back
on 2007 with a sense of accomplishment about the returns we delivered
to you. We increased our operating profit and earnings per share, and
set a new high in cash flow from operations, an achievement that underscores
the success of our customers, the quality of our products and the effectiveness
of our manufacturing strategy. With the proceeds from this performance,
we raised your quarterly dividend 150 percent. We also steadily used repurchases
to reduce the number of shares that are outstanding and, in the process,
increased your ownership of our company.
We left the year feeling confident about the investments we made and the
impact they will have on future performance. We continued to increase
our strength in analog with more funding for research and development,
more manufacturing capacity and a larger sales network. Our share gains
in high-performance analog were substantial, and we head into 2008 expecting
to build on this momentum.
Likewise, we built strength in digital semiconductors, especially those
for embedded processing, such as digital signal processors and low-power
microcontrollers, a product line that is small in revenue but growing
rapidly. Our expertise in embedded processing put us at the heart of exciting
new applications, such as automotive navigation systems, portable ultrasound
products, energy-efficient motors and uninterruptible power supplies.
But even with our strong profit performance and solid investments for
the future, we did not leave 2007 fully satisfied because revenue growth
did not meet our expectations, nor yours. As a result, we intensified
our emphasis on growth as a top priority for our company by sharpening
our focus on customers. We are accelerating our reach into emerging economies
because these markets will be important growth drivers of both the world
economy and the semiconductor industry for many years. We opened four
new sales offices in China and India to serve customers there. In Eastern
Europe, we added three sales offices and a customer support center. We
expanded our sales force in most regions of the world and increased the
technical support we provide customers by adding 20 percent more analog
applications engineers to work directly with customers in the field.
We were encouraged that our growth trends turned positive as we resumed
year-on-year growth in the fourth quarter. Importantly, this growth came
from analog and digital signal processing, technologies that customers
value and that deliver good returns for you, our shareholders.
As we look ahead, we see great opportunity. With our commitment to customers
and the quality of our technology, we believe we can substantially increase
our share of the market for analog semiconductors and continue to help
customers invent new products using digital signal processing. Wireless
will remain a key element to our success, but it is important to note
this market is changing. Some of the semiconductors sold into this market
are becoming less differentiated. More strategically, our customers are
increasing their focus on the user interface of cell phones and creating
new applications and services. Our OMAP™ applications processor,
now in its third generation, is already the processor of choice for multimedia
features in many of today’s most successful cell phones, and this
opportunity is just starting to build.
Our connections to customers allow us to glimpse the future and help make
it happen. We work with engineers around the globe, people who are using
electronics to tackle some of the world’s toughest challenges –
making health care more accessible, reducing energy consumption, improving
public safety and bringing communications to remote areas. At Texas Instruments,
we believe the best is yet to come. Our customers are our window to the
future, and through it, we see enormous possibilities – and the great
opportunity to develop semiconductor technologies that help make the world
smarter, healthier, safer, greener and more fun.
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