For Sale: Freescale's Wireless Chip Biz — Cheap


Freescale Semiconductor (s fsl) said this afternoon that in an effort to focus its energies on high-growth segments such as automotive and networking chips, it will consider strategic options for its wireless chip business, including its possible sale. Anyone looking at the varied business units of the former in-house chip division of Motorola would have seen this coming. It has too many business lines, most of which didn’t have enough market share to be truly competitive, as we said back in May.

Chairman and CEO Rich Beyer, who joined the firm in February, said in the release:

“In the cellular handset chipset market, it has become evident that this business needs considerably greater scale in order to achieve a position of market leadership and long-term success. We feel the investment required to achieve that scale by Freescale will be better served extending our product portfolios where we are the leader and expanding our application expertise in sensors, analog, power and multimedia processing.”

Freescale’s wireless handset chip line isn’t exactly a plum asset. Its largest customer, Motorola, has been taking on chipsets from new suppliers, including Qualcomm, which recently lost its COO to Motorola, and could expect more deals as a result of that. It’s also a smaller player in the industry and may not have a lot to offer to firms such as Texas Instruments or STMicroelectronics. That means a tier-2 buyer might find the wireless division interesting, but likely not at a great price.

That’s unfortunate, because after the $17.6 billion private equity deal to take it private in 2006 that left Freescale saddled with $9.5 billion in debt, it is one highly leveraged company. And one that reported, by comparison, sales of $5.72 billion last year, down from $6.36 billion in 2006. So…any takers?

image courtesy of Freescale


David H. Deans

Stacey, this is very disappointing news. It’s likely an acknowledgment that Mr. Bayer has been unable to successfully address the legacy culture issues that he inherited at Freescale.

By the way, the notion that they’re now focusing on the Automotive semiconductor segment because it’s “high growth” is clearly Freescale PR spin. Here’s an excerpt from my post on this very topic.

“The automotive segment share is also forecast to remain essentially flat. There are many opportunities for semiconductors in high-end vehicles, but these are relatively low volume. The much-hyped impending growth of the automobile markets in China and India will be concentrated in low-priced vehicles with little semiconductor content.”


What is the possibilty of a joint venture or a Joint development progam (JDP) like the Freescale’s and STMicroelectronics’s automotive division has?

Also, what can be consequences of sell-out?

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