Although Texas Instruments reported better-than-expected fourth-quarter chip sales, the company will close older factories to cut costs.

Texas Instruments announced fourth-quarter revenue of $3.42 billion, net income of $298 million and earnings per share of 25 cents.

"Revenue in the fourth quarter was higher than expected across all our major product lines, reinforcing our belief that we're at the bottom of this downturn. I'm pleased to say that despite the downturn and the lower factory utilization that came with it, cash flow from operations was strong and well above levels as compared with similar points in prior downturns. Our strategic focus on our core businesses and efficient investment in capacity are key to our strong generation of cash," said Rich Templeton, chairman, president and chief executive officer. "As we move into 2012, we enter the final phase of our planned exit from the baseband market, and thus further tighten our focus on Analog, Embedded Processing and Wireless."

TI also announced plans to close two older semiconductor manufacturing facilities in Hiji, Japan, and Houston, Texas, over the course of the next 18 months. Production from these sites will be moved to other more advanced TI facilities. Combined, these factories supported about 4 percent of TI's revenue in 2011, and each employs about 500 people. "These sites have made strong, high-quality contributions over the 30-plus years each has operated," said Templeton. "They demonstrate the tremendous cash flow potential associated with analog products, where factory lives are literally measured in decades. However, we're now at the point where each of these sites requires significant upgrades, and it makes financial sense to shift production to larger, more advanced facilities."

TI's revenue fell to $3.42 billion from $3.53 billion. TI had warned December 8 that chip demand was weak, forecasting quarterly earnings per share in a range of 21 to 25 cents on revenue of $3.19 billion to $3.33 billion. But March said that orders started to improve right away after the December warning.

Revenue from the baseband business, whose main customer is Nokia, will fall to about $75 million this quarter from $279 million in the fourth quarter, said Chief Financial Officer Kevin March.

Excluding the decline in baseband revenue, he said TI's first-quarter revenue would have fallen 2 percent from the fourth quarter, compared with the more typical sequential decline of 4 percent.