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Activist investor Elliott discloses $2.5 billion stake in Texas Instruments

Published 05/28/2024, 09:23 AM
Updated 05/28/2024, 10:26 AM
© Reuters. A Texas Instruments Office is shown in San Diego, California, U.S., April 24, 2018.  REUTERS/Mike Blake
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(Reuters) - Activist investor Elliott Investment Management disclosed a $2.5 billion stake in analog chipmaker Texas Instruments (NASDAQ:TXN) and urged the chipmaker to improve its free cash flow.

Elliott proposed in a letter to the company's board that Texas Instruments introduce a "dynamic capacity-management strategy", which would allow it to achieve free cash flow of as much as $9 a share by 2026.

The company's free cash flow fell 77% to $1.47 per share in 2023, according to LSEG data.

In a report earlier this year, Texas Instruments said it expects capital spending of about $5 billion a year through 2026 and projected capital expenditure of 10% to 15% of revenue in 2027 and beyond.

The company has plans to spend billions of dollars to build multiple manufacturing facilities to develop new technology and support revenue growth.

© Reuters. A Texas Instruments Office is shown in San Diego, California, U.S., April 24, 2018.  REUTERS/Mike Blake

Demand for analog chips is on the mend after an extended slump owing to surplus inventory at automotive manufacturers and industrial customers. But Elliott said in the letter that Texas Instruments was building "far in excess of expected demand" with targeted revenue capacity of $30 billion in 2026.

Analysts, however, expect revenue of $19.92 billion that year, according to LSEG data.

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