Ahead of the Bell: Texas Instruments (AP)

NEW YORK — After nearly a year of swollen inventories, Texas Instruments Inc. said late Monday the chip industry may now be suffering from the opposite problem: understocked warehouses.

The Dallas-based company, which makes chips that power cell phones and other products, narrowed its profit and sales forecast for the second quarter on Monday. Analysts said the update confirms the overstocked inventories hampering the chip industry the past few quarters have mostly cleared.

Now, Texas Instruments said customers are managing their inventories very carefully to avoid buying too many chips. In some cases, they are managing inventories too carefully, said Ron Slaymker, vice president and manager of investor relations.

"We'll just have to see whether they could have it exactly right or they could have it tight," he said in a conference call. "We'll just have to see how demand rolls out over time."

Lean customer inventories are a much more benign headache than inventories that are oversupplied. When customers have too many chips, they hold off on new orders so they can clear the products they already have.

When customers allow inventories to dwindle, Texas Instruments has less visibility into future orders and its business backlog.

Shares of Texas Instruments fell 74 cents, or 2.1 percent, to $35.05 in premarket trading Tuesday. The shares closed Monday at $35.79.

Texas Instruments said it now expects sales of $3.36 billion to $3.51 billion, compared with the previous forecast of $3.32 billion to $3.6 billion. The company expects a profit of 40 cents to 44 cents per share, versus the previous projection of 39 cents to 45 cents per share.

Goldman Sachs analyst James Covello said in a client note some investors will be disappointed with Texas Instruments' update because they expected the company to narrow its forecast toward the top end of its previous range.

Analysts polled by Thomson Financial on average forecast a profit of 42 cents per share on revenue of $3.46 billion.

Tim Luke, an analyst with Lehman Brothers, said the forecast may fall shy of high expectations, but he is encouraged by solid order trends and improving profits.