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NEW YORK (Reuters) - The managing editor of the Wall Street Journal could resign from his post as soon as Tuesday morning, Time magazine reported on its Web site on Monday, citing sources.

Marcus Brauchli, who took the top job at the paper just over a year ago, is likely to stay with the company in a yet-to-be-determined role but a search is already under way for the next managing editor, Time reported a source saying.

A Wall Street Journal spokesman declined to comment.

Rupert Murdoch's News Corp acquired the newspaper this year in its $5 billion takeover of Dow Jones. Time said Brauchli had tried to forge a middle way between the paper's traditional journalists and News Corp's new vision.

(Reporting by Emily Chasan and Robert MacMillan; Editing by Braden Reddall)

When Charlie Miller won US$10,000 for hacking into a Macbook Air laptop last month, he exploited a flaw that had been publicly disclosed nearly a year before the contest.

The flaw, it turns out, lay in an open-source software library called the Perl Compatible Regular Expressions (PCRE) library, which is used by many products including Apache, the PHP scripting language, and Apple's Safari browser, which Miller hacked to win the contest.

Miller won $10,000 and a new Macbook Air last month after hacking into the laptop in a matter of minutes. The PWN2OWN contest invited hackers to try to install unauthorized software on fully patched Mac OS X, Windows and Linux computers using previously undisclosed “zero-day” flaws.

In an e-mail interview, security researcher Chris Evans said he found the bug, which he publicly disclosed in November 2007. PCRE developers fixed the bug months earlier while writing an incomplete fix for the issue in the May 2007 PCRE 6.7 product, Evans said.

Although Apple's Safari browser uses the PCRE software library, the company did not patch its version of the library until late last week. That means that an astute hacker who had noticed the fix in PCRE 6.7 would have been given an early tip on how to hack into Apple's computers.

Discovering a software bug is the first step toward figuring out how to use that flaw in an attack, but not every flaw leads to a successful exploit.

In an e-mail interview, Miller confirmed that the bug he'd exploited was the same one that was patched in PCRE 6.7, but said that researchers at his company, Independent Security Evaluators, had found it “completely independently.”

Miller found another PCRE bug that allowed him to be the first hacker to break into the iPhone after it was launched last year.

It is very common for developers to incorporate someone else's software library into their program and then not properly add all the latest bug fixes, said Dragos Rui, one of the organizers of the PWN2OWN contest.

However, Apple should have done a better job of staying on top of the software it was shipping. “This is a black mark on their security team, but it's a common problem,” he said. The same kind of issue has popped up frequently with products that use the zlib and JPEG compression libraries, he added.

An Apple representative could not immediately comment for this story, saying that he would have to first research the issue.

Ironically, Miller gave a presentation at the Black Hat security conference last year, arguing that one way to find bugs in Mac OS X would be to look for out-of-date open-source software that ships with the Mac and then to scan that project's files.

“I told Apple about this backporting problem then and they didn't listen and I didn't listen either, because we didn't find the bug by looking at changelogs, we found it with source code analysis,” Miller said.

Although the focus of the PWN2OWN contest was on zero-day flaws, the fact that Miller exploited a flaw that was unpatched in Apple's products was enough to earn him the prize, conference organizers say.

That's a good thing, because when asked if he planned to return the prize money, Miller shot back the following: “No way. It's not my fault they don't fix their bugs.”

NEW YORK (Reuters) - Microchip maker Texas Instruments Inc said quarterly profit rose but forecast results below Wall Street estimates, citing caution among a broad customer base as well as weak demand for high-end cell phones.

TI shares fell 2.5 percent in extended trade after the company also said on Monday its second quarter would be weaker than expected due to an uncertain economic situation.

Analysts believed the order weakness was mainly in wireless even though TI did not say how much was in the rest of its business, which includes analog chips used in various markets including consumer electronics and industrial products.

“We're just responding to our customers' conservatism. They're managing their inventory very tight,” Chief Financial Officer Kevin March said in an interview with Reuters. TI cited inventory levels that would take about two weeks longer to clear than in the same quarter a year ago.

While March said guidance was conservative across the board, he said demand for third-generation phones with fast Web links in particular would grow more slowly than anticipated.

“Demand will probably increase over time, but at a more delayed pace than customers might have previously expected,” March said, referring to the advanced 3G phones, which include as many as four times more TI chips than more basic phones.

Qualcomm Inc, TI's main rival in wireless chips and a big player in 3G, is set to post results on Wednesday, a day after smaller rival Broadcom Corp reports.

“I would attribute it to wireless despite the company's talk of a conservative outlook for the broad market,” said Charter Equity Research analystJohn Dryden, who estimated that about half of TI's analog business relates to cell phones.

TI forecast second-quarter earnings per share of 42 to 48 cents on revenue of $3.24 billion to $3.5 billion. Analysts, on average, had expected 48 cents on revenue of $3.45 billion.

Its first-quarter profit rose to $662 million, or 49 cents a share, from $516 million, or 35 cents a share, a year ago. Excluding a 6 cent-per-share tax benefit, the latest number met analyst expectations, according to Reuters Estimates.

Revenue rose to $3.27 billion from $3.19 billion.

Stifel Nicolaus analyst Cody Acree said it was not surprising that TI saw weak 3G demand after a disappointing view from its biggest customer, Nokia, last week, but that TI's broader caution beyond this was a new concern.

“That's the biggest concern right now,” said Acree, adding that wireless was likely the biggest factor in the disappointing second-quarter outlook.

In March, TI forecast earnings per share of 41 to 45 cents on revenue $3.21 billion to $3.35 billion, warning at the time that wireless demand was weaker than expected, particularly from one customer.

“It's disappointing that the visibility has not improved,” Acree said. TI's March said chip demand for computer hard disk drives was weaker than expected in the first quarter.

TI shares fell to $29.80 in extended trading from its close of $30.59 on the New York Stock Exchange.

(Additional reporting by Michele Gershberg; Editing by Andre Grenon and Braden Reddall)

SAN FRANCISCO - Netflix Inc.’s first-quarter profit climbed 36 percent amid the largest subscriber gains in the online DVD rental service’s 10-year history, but a projected slowdown overshadowed the performance.

The tepid forecast provided by the company Monday caused Netflix shares to plummet 14 percent in after-hours trading.

Netflix earned $13.4 million, or 21 cents per share, during the first three months of the year. That compared with net income of $9.9 million, or 14 cents per share, at the same time in 2007.

Revenue rose 7 percent to $326.2 million from $305.3 million.

The earnings matched the average estimate among analysts surveyed by Thomson Financial, but many investors had been betting the company’s profit would exceed those expectations.

Netflix ended March with 8.24 million subscribers, a gain of 764,000 customers from the end of 2007. That’s the biggest influx of new customers in any quarter since the Los Gatos-based company set up its DVD rental service, which processes requests online and then delivers the discs through the mail.

Management attributed much of the first-quarter surge to a series of rate increases announced in late December by its biggest rival, Blockbuster Inc. The higher prices triggered a backlash that drove more DVD renters to Netflix, which cut its prices last summer.

But Netflix anticipates only 60,000 to 260,000 more customers will sign up during the current quarter ending in June — typically a challenging period anyway because more people are interested in basking in the warm weather than in watching movies on their couches.

In another worrisome sign, Netflix shaved a penny off the upper end of its full-year guidance to $1.29 per share.

Netflix shares plunged $5.52 in extended trading after rising 76 cents to finish Monday’s regular session at $39.32. The company’s market value had risen by nearly 50 percent this year before the disappointing second-quarter forecast.

Propelled by more robust growth toward the end of the year, Netflix anticipates entering 2009 with as many as 9.7 million subscribers, up from its previous forecast of 9.5 million customers.

Hoping to defray some of its expenses for stocking its library with the more expensive, high-definition Blu-ray discs, Netflix plans to raise its fees later this year for those rentals by a “modest” amount, Chief Executive Reed Hastings said.

Netflix’s most popular rental plans currently range from $13.99 to $16.99 per month.

The rate increases are expected to affect less than 10 percent of Netflix subscribers because relatively few households own Blu-ray DVD players.

Netflix also revealed that it has lined up more partnerships to expand the appeal of a service that lets subscribers stream about 9,000 movies and TV shows over high-speed Internet connections at no additional cost.

Hastings disclosed Monday that three consumer electronics companies have agreed to sell devices designed to make it easier to stream Netflix’s digital service on televisions, expanding upon an earlier partnership announced earlier this year LG Electronics.

Hastings didn’t identify Netflix’s newest partners, but said two of them are well known. The boxes for delivering Netflix’s streaming service to television is expected to hit the market during the fourth quarter.

Web 2.0 is set to be embraced by Enterprise 2.0 as businesses prepare to spend nearly $5 billion by 2013 on social networking tools.

Over half of the companies in North America and Europe see Web 2.0 as a priority for next year, a report says.

The news comes as San Francisco plays host to the Web 2.0 conference on next generation of the web.

“This is where we see the future of the web,” said conference co-chair Jennifer Pahlka.

“The companies making announcements here are building that future.”

Forrester, the research company which carried out the Web 2.0 survey, believes the technologies being developed and unveiled over the coming days represent “a fundamentally new way” for businesses to communicate with employees and customers.

Priority

The report found that consumer giants such as General Motors, McDonald’s, Northwestern Mutual Life Insurance and Wells Fargo Bank will drive much of this growth and have already embraced tools like blogs, RSS feeds, podcasting and social networking.

Analyst Oliver Young estimates that another 56% of North American and European companies regard Web 2.0 to be a priority in 2008.

“If I wanted to be anywhere in the Web 2.0 economy, I’d want to be on the enterprise side,” says Mr Young.

Forrester analysed seven Web 2.0 categories: blogs, mashups, podcasting, RSS, social networking, widgets and wikis. Of these, social networks will attract the greatest levels of investment but even then that will be dwarfed by the multi million dollar revenues the software industry commands.

Mr Young says “Advertising revenue has been hard to come by with even sites such as Facebook finding it hard to monetise their high volumes of traffic.

“Companies are now looking over their shoulder to the business market where even revenues of $50 (?25) per user per month are looking increasingly appealing”

He also points out that there will come a saturation point and investment will start to slow down as Web 2.0 applications become increasingly prevalent and absorbed into collaborative software packages.

‘Disneyland for web nerds’

In the meantime, the world of business will get to see what is on offer in the Web 2.0 world as vendors take the wraps off a raft of products, services and applications during this week’s conference in San Francisco.

Everything from the latest in cloud computing to blogging software and from mobile technology to rich media applications will be on show.

With around 7,000 people expected to attend, some bloggers have already nicknamed the conference a “five-day retreat to the Disneyland for grown-up web nerds”.

Also taking part is a Web Mission from the UK which consists of more than 20 entrepreneurs looking to forge useful business connections and showcase British internet companies.

The businesses, which were selected from over 100 applicants, were chosen because they have the potential to expand into the US.

LOS ANGELES (Reuters) - U.S. online DVD rental company Netflix Inc on Monday posted lower quarterly profit margins as it increased spending for online content.

Its shares fell 13 percent in after-hours trading.

The company's first quarter earnings were in line with consensus estimates, but many had expected Netflix to surpass those estimates.

“Expectations were really ramped up. People had expected Netflix to report beyond what it had forecast for subscribers and the gross margin was light,” said JP Morgan analyst Barton Crockett.

Net income grew to $13.4 million, or 21 cents per share, from $9.9 million, or 14 cents per share, in the year-ago period. First quarter revenue rose 7 percent to $326.2 million from $305.3 million a year earlier.

Shares of Netflix have outperformed rival Blockbuster by a wide margin this year, contributing to high expectations from investors. Netflix stock had been up nearly 45 percent this year, while Blockbuster is down about 20 percent.

Netflix said it ended the first quarter with 8.24 million subscribers, representing 21 percent year-over-year growth from 6,797,000 total subscribers in the year-earlier period.

The gross profit margin for the first quarter was 31.7 percent, compared to 36.1 percent for the first quarter of 2007 and 33.8 percent for the fourth quarter of 2007.

On a conference call, Netflix officials said content costs have risen due to content rights investments for films delivered over the Web.

In an interview, Netflix Chief Executive Officer Reed Hastings would not disclose how much Netflix is spending in this area, but said it will continue to increase.

Netflix launched its Watch Instantly service last year, which allows its subscribers to watch movies online at no additional charge, with 2,000 titles. It now offers 9,000.

“We're investing heavily in online content to build awareness and it's fair to say that we're continuing to grow title count,” he said.

Netflix officials on the call said they expect gross margins to remain steady for the calendar year with a slight uptick in the fourth quarter, despite the increased costs for Web-delivered films and a postage rate hike of two cents per round trip mailer beginning next month.

For the second quarter, Netflix forecast ending subscribers at 8.3 million to 8.5 million, with revenue of $334 million to $339 million. It said it expects net income of $21 million to $27 million with earnings per share of 33 cents to 42 cents.

It raised its full year subscriber forecast range, previously at 8.9 million to 9.5 million, now to 9.1 million to 9.7 million subscribers.

It also raised its revenue forecast, forecasting a range of $1.35 billion to $1.39 billion, up from $1.345 billion to $1.385 billion.

It's full year net income forecast was unchanged from an expected range of $75 million to $83 million.

But it lowered its earnings per share guidance range to $1.16 to $1.29 per share, from the previously forecasted range of $1.18 to $1.30 a share.

Analysts have deemed Blockbuster's recent bid for consumer electronics retailer Circuit City as a positive for Netflix on the premise that it would further reduce Blockbuster's focus on the online DVD mail-order sector.

Netflix has been benefiting in the past few quarters from reduced competition as Blockbuster, in an effort to turn itself around, has reduced spending on its costly rivalry with Netflix to instead focus on in-store DVD rentals.

Netflix shares fell to $34.24 in after-hours trade, after closing at $39.32 a share.

(Reporting by Sue Zeidler; editing by Carol Bishopric)

Nintendo’s Wii has dominated video-game hardware sales since its debut in November 2006, and it shows no sign of slowing down. In March, U.S. stores sold more Wii consoles than Xbox 360s and PlayStation 3s combined.

And now that shortages of Nintendo’s machine seem to have abated, there’s nothing to stop its momentum.

Or is there? Consider that almost all of the best-selling Wii games, like “Super Smash Bros. Brawl” and “Super Mario Galaxy” have been published by Nintendo. Games from other companies haven’t done nearly as well.

Some publishers have grumbled that Nintendo hasn’t done enough to support their products. But the real problem is more obvious: Most of the Wii’s third-party software doesn’t measure up. There are a handful of good non-Nintendo Wii games (like Capcom’s remakes of “Okami” and “Resident Evil 4″), but an awful lot of lackluster junk is being shoveled onto the platform. And gamers are the ones getting burned.

_”Opoona” (Koei, for the Wii, $49.99): Koei, known mainly for historical epics like “Romance of the Three Kingdoms,” deserves some credit for trying something different with “Opoona.” It’s a lighthearted role-playing game with a distinctively whimsical style, but it’s not quite lively enough to hold the attention of the younger players in its presumed target audience.

After his family’s spaceship crashes on the planet Landroll, Opoona comes to in a high-tech colony that under siege by “Dark Rogues.” You’d think his rescuers would help Opoona find his parents and siblings, but no — they send him alone into the wild to battle the monsters. Fortunately, he has an “energy bonbon” floating above his head, and he can heave it at the bad guys to knock them out of commission. The combat is fairly innovative, requiring only the Wii’s nunchuck; you hold back the joystick to determine the bonbon’s power and distance.

It’s all the stuff between fights that drags down the experience. Landroll’s bureaucracy is a little too sprawling, so you spend a lot of time wandering between offices while you’re trying to figure out your next mission. And you’re encouraged to make friends with every colonist you meet, but they don’t help you toward your goal. “Opoona” has some promising ideas, but the game overall feels half-baked. Two stars out of four.

_”Baroque” (Atlus, for the Wii, PlayStation 2, $39.99): I had high expectations for Atlus’ first Wii role-playing game, thanks to the publisher’s reputation for memorably off-kilter adventures like last year’s “Persona 3.” “Baroque” is enticingly bizarre, but it’s so fundamentally flawed that it will tax the patience of even the most avid Atlus fanboy.

It begins in a world that’s been devastated by a cataclysmic event called “The Blaze.” The neighborhood mutants blame your character for the disaster, although you can’t remember anything. The only way to atone for your sins is to descend into a dungeon called the Neuro Tower.

There, you fight hundreds of monsters and occasionally get an ambiguous clue about the apocalypse. Eventually you die, and get another vague hint. Then it’s back to the beginning of the tower. The rewards are parceled out so stingily that it’s hard to get excited about another round of repetitious combat. I really wanted to know what happened in the world of “Baroque,” but not enough to endure the same dungeon over and over. One star.

_”WWII Aces” (Destineer, for the Wii, $39.99): Of all the small companies that have tried to make a buck off the Wii, Destineer may be the most consistent, churning out dependably awful games like “Monster Trux Offroad” and “Rig Racer 2.” They’re the sort of products that gamers instinctively avoid, although well-meaning but clueless gift givers may be more easily suckered.

“WWII Aces” is, obviously, an aerial combat simulation, in which you machine-gun the flying targets and bomb the ground targets. Flying and fighting are a lot harder than they should be, thanks largely to awkward controls. There are dozens of missions, which sounds great until you realize you’re doing the same thing over and over.

Different models of planes are pretty much indistinguishable from each other, and the scenery is so bland you might as well be dogfighting over Iowa. “WWII Aces” may not be the worst Wii game on the market, but that’s only because Destineer has given it so much competition. No stars.

__

On the Net:

“Opoona”: http://www.koei.com/opoona/

“Baroque”: http://www.atlus.com/baroque/

“WWII Aces”: http://www.destineerstudios.com/

San Francisco - Mashups, which unite disparate data sources in quickly developed Web applications, are a hot topic at the Web 2.0 Expo conference in San Francisco this week, with companies including Serena Software, JackBe, and Kapow Technologies offering new products geared to mashup development.

Offerings include an online marketplace and a hosted service for mashups.

Serena is launching Tuesday its Serena Mashup Exchange, an online marketplace for marketing “Business Mashups.” Serena defines Business Mashups as mashups that solve business problems and combine visual and data elements from multiple sources within a process-driven framework.

Business users, IT departments, and others can find, buy and sell pre-packaged mashups, Web services and professional services without incurring fees or commissions from Serena. The company said it is providing the marketplace in an effort to control the “long tail” of IT applications, which are projects that individually are too small to warrant IT support yet represent a market opportunity.

With Mashup Exchange, companies can build “MicroExchanges” for secure internal interchange between IT and business units, such as publishing mashup-enabled access to an internal SAP system.

Additionally, Serena and CapGemini said they are helping companies bring Web-based consumer-oriented technology into the enterprise via CapGemini's RAIN (Rapid Innovation) environment for developing business models for a service-oriented enterprise. With RAIN, workers can address business issues on their own rather than relying on IT. RAIN enables professionals to compose a mashup without the need for programming skills. Serena's Business Mashup tools can be leveraged in the process.

JackBe is announcing Tuesday general availability of Presto 2.0, the second generation of its enterprise mashup platform. Featured are enterprise mashup widgets called “Mashlets,” which are portable, shareable micro Web applications used for common knowledge worker activities such as analyzing sales data and enterprise risk analysis. Users can share Mashlets through enterprise portals, blogs, wikis, or e-mail.

Also featured in Presto 2.0 is connectivity for products like Excel, HP SOA Systinet, and Adobe Flash/Flex. A mashup development plugin for the Eclipse platform has been built as well.

“Enterprise technology is encountering a ???perfect storm??? of SOA, mashups, and widgets that are converging to finally allow the business to address their most dynamic information needs. And enterprise mashup platforms like Presto 2.0 are an integral part of that solution” said John Crupi, CTO at JackBe, in a statement released by the company. “Presto 2.0 greatly expands the speed, scale, and scope of information use and re-use within the enterprise. Presto Mashlets alone make Presto 2.0 worth looking at, but we went much further, bringing mashups and mashlets to every major tool in use by business user and developers.”

Presto Wires, a visual mashup development tool, is featured in version 2.0 along with Presto Connector for Excel, for consuming mashups in Excel and publishing mashup-ready Excel spreadsheets.

Kapow Technologies will show off Kapow OnDemand on Tuesday, providing a hosted service for building enterprise mashup applications that provide structured “Web intelligence,” the company said.

Based on the Kapow Mashup Server, Kapow OnDemand offers access to underlying data sources and services to be mashed. Users also can import Web data into existing applications and IT infrastructure via XML.

OnDemand features a “Robot Designer” to construct custom Web harvesting feeds and services in a role-based execution runtime, the company said. Monitoring and management tools also are featured.

Deployed on a commercial-grade grid, OnDemand provides a secure service featuring load balancing, high availability, failover, and automated backup and restore, Kapow said.

Users can access a visual scripting environment for building services and feeds that automate collection and delivery of Web intelligence.

Pricing for Kapow OnDemand is based on a subscription with prices starting at $3,400 per month.

Kapow also is announcing Kapow Connector for Excel, enabling Excel spreadsheet users to use Web services that provide data directly to their spreadsheet. The connector is used in combination with Kapow OnDemand or Kapow Mashup Server Web 2.0 edition. Users can analyze Web intelligence on their desktop.

IBM has acquired privately held storage software provider Diligent Technologies. The financial terms were not disclosed.

Diligent's deduplication software substantially reduces the amount and cost of physical storage required in data centers while maintaining the integrity of the data, noted Andy Monshaw, general manager of IBM System Storage.

“Exceptionally suited for midrange and enterprise clients,” the newly acquired technology is designed “to eliminate redundant data and streamline the infrastructure required to support their businesses, which can result in dramatic improvements in data-center efficiency,” Monshaw said.

A Good Fit

“For IBM, Diligent is a good fit,” noted Forrester Research analyst Stephanie Balaouras. “The company offers both mainframe and open systems virtual tape libraries and they are a pioneer of deduplication,” she said.

Deduplication is important because storage capacities are growing 50 percent or more a year and most of the information that we store — at a file and at a block level — is redundant, Balaouras noted. “With deduplication, companies can reduce storage-capability requirements by a factor of 10 to 15 times,” Balaouras said.

As corporate information grows, so does the amount of time required to back up that data. Deduplication technology enables enterprises to cut costs by reducing this time requirement.

The technology also reduces the amount of physical storage required in the data center, which leads to lower energy costs, noted Diligent CEO Doron Kempel. “Any economically oriented customer who cares about data protection will need this technology,” Kempel said.

Impeccable Timing

The Diligent acquisition follows Sun Microsystems' announcement that it is adding deduplication capabilities to its virtual tape library storage portfolio. The announcement was no big surprise, according to Balaouras.

“Customers now expect virtual tape libraries and other backup to disk appliances to support deduplication,” Balaouras explained. “Every VTL and appliance vendor will support deduplication within three months, if not sooner.”

What Diligent's software does is give IBM Systems Storage a strategic capability that has already proven its worth to enterprises and will continue to be available through Diligent's existing sales channels. Big Blue expects to offer IBM-branded solutions based on enhanced versions of Diligent's technology, noted IBM Systems Storage Vice President Cindy Grossman.

“Expect to see that later in 2008, beginning with our IBM virtualization engine tape products,” Grossman said. “And then there'll be more to come after that.”

IBM's timing appears impeccable. In a recent survey of 152 Fortune 1000 enterprises conducted by TheInfoPro, 56 percent of respondents said they spent more on data deduplication in 2007 when compared to 2006 — a spending trend that the research firm expects to continue this year. Moreover, data deduplication appears poised to become a $1 billion market in 2009, according to a mid-2007 report from researchers at The 451 Group.

Moreover, Balaouras notes that deduplication is just now hitting an expanding market phase in backup. “It will eventually be employed in production storage systems as well,” Balaouras said. “You can see companies like NetApp pushing the boundaries of where deduplication is employed.”

In the long term, Balaouras thinks, IBM will try to find additional opportunities for taking advantage of Diligent's deduplication technology — “either as embedded technology or as a deduplicating gateway to any of its storage systems,” she said.

DALLAS - Texas Instruments Inc. said Monday its first quarter profit rose 28 percent despite weaker sales of chips for high-end cell phones, but the company offered a cautious outlook for the second quarter due to the slowing economy.

The leading maker of chips for cell phones, TI said it earned $662 million, or 49 cents per share, in the first quarter this year, compared with $516 million, or 35 cents per share, a year ago.

Excluding a tax gain, the most recent profit would have been 43 cents per share. That was in line with the prediction of analysts surveyed by Thomson Financial.

Revenue rose 3 percent, to $3.27 billion, a tick below analysts’ forecast of $3.28 billion.

Before the report was released, Texas Instruments shares rose 99 cents, or 3.3 percent, to $30.59. In extended trading after the report’s release, they fell 72 cents, or 2.4 percent.

The Dallas-based company said it benefited from strong sales of high-performance analog semiconductors, which are widely used in a variety of industrial products and consumer gadgets such as digital cameras and music players. They make up about 40 percent of TI’s revenue.

Sales of digital signal processors, used in cell phones, fell 3 percent.

Inventories also rose, and the company gave a cautious preview of the April-June quarter.

“Given uncertainty in the near-term economy, we have become more conservative with our outlook for the second quarter,” said Chairman and Chief Executive Richard K. Templeton.

The company said it expected to earn 42 cents to 48 cents per share in the second quarter, while analysts were forecasting 48 cents per share.

Texas Instruments said April-to-June revenue would be $3.24 billion to $3.50 billion. Analysts were expecting $3.44 billion.

Texas Instruments faces an erosion of business from top customers Nokia and Sony Ericsson, which indicated last year they would work with several suppliers of cell phone chips instead of just TI.

Last month, Texas Instruments lowered expectations for the quarter, citing reduced sales to a big customer it didn’t name that analysts widely assumed was Nokia, the world’s largest cell phone maker.