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Freescale Semiconductor Buyout?

Posted by ryuzaki0 on from the removal-from-the-market dept.

Alchemist253 writes "The New York Times is running an article about a possible leveraged buyout of speciality chipmaker Freescale Semiconductor. Freescale currently makes a variety of embedded processors, microcontrollers, and memory, but is probably best known to the Slashdot crowd as the Motorola spinoff that supplied Apple its PowerPC chips before the shift over to an Intel architecture. From the article, "A consortium of investment firms was near a deal late last night to acquire Freescale Semiconductor... for more than $16 billion, according to people briefed on the negotiations. The deal, if completed, would be the largest leveraged buyout ever in the technology sector, surpassing the $11.3 billion sale of SunGard Data Systems last year.""

13 of 67 comments (clear)

  1. Borrow Money to Buyout a Company by eldavojohn · · Score: 2, Interesting
    What is a leveraged buyout?
    From the Wikipedia entry on it:
    A leveraged buyout (or LBO, or highly-leveraged transaction (HLT), or "bootstrap" transaction) occurs when a financial sponsor gains control of a majority of a target company's equity through the use of borrowed money or debt.
    So, they're essentially borrowing money to buy them out. What does this mean? Well, perhaps the people buying them out think they can pay that debt off quickly or they have a lot of money in the bank and qualified for the loan. Either way, it's interesting to me because I would have predicted this company to drop in value after Apple went x86 architecture. I'm sure they have other business and contracts, it's just interesting to see someone borrow money to buy them out. What do they know that we don't? Isn't Freescale's business going to drop dramatically?
    --
    My work here is dung.
    1. Re:Borrow Money to Buyout a Company by oscarmv · · Score: 2, Insightful

      In fact Freescale is a major player in the embedded processor and other specialized processor markets, and even in the heyday of its relationship with apple, the percent of business that represented was a drop in the bucket.

      If you want to figure that one out, start checking what CPU your router is using, or your car, or a gazillion of those things nowadays that happen to use a CPU even if it doesn't boot in a GUI OS nor is used plugged to keyboard and monitor.

    2. Re:Borrow Money to Buyout a Company by Otter · · Score: 3, Insightful

      1) Typically LBO purchasers are getting their money either from bonds or from a pool of private equity, not from a bank loan.

      2) Again typically, the plan is to sell off unproductive parts of the company, cut costs, or increase value with some other short-term plan.

      3) If there were some obvious decline facing Freescale, it would already be priced into the stock.

      4) As someone else has pointed out, this is a huge company that isn't a familiar name only because it doesn't make branded consumer products.

      --
      What I'm listening to now on Pandora...
    3. Re:Borrow Money to Buyout a Company by xlordtyrantx · · Score: 2, Interesting
      Freescale has contracts with numerous companies. [freescale.com]

      * Motorola cell phones

      * Sony electronics

      * Whirlpool appliances

      * Logitech keyboards and mice

      * Lifefitness cardiovascular and strength training equipment

      * Cisco routers

      * Bose Acoustic Wave radios

      * Trane heating and cooling equipment

      * Mercedes, BMW, Ford, Hyundai and General Motors vehicles

      --
      Eagles may soar, but weasels never get sucked into jet engines...
    4. Re:Borrow Money to Buyout a Company by nelsonal · · Score: 2, Insightful

      In regard to point 1, it wouldn't be an LBO (just an offer or BO) if some of the money weren't coming from loans. Most of the time the banks require a decent portion of the money to be invested by the fund but will loan a large amount of the transaction.

      --
      Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
  2. TFP is WRONG by Chanc_Gorkon · · Score: 3, Informative

    Apple did NOT get the G5 from Freescale. That came from IBM. Apple got the G4's from Freescale so the post is PARTIALLY correct. The PowerPC platform still has a strong presence in the server room and is FAR from dying. It just might not be used for desktop stuff anymore.

    --

    Gorkman

    1. Re:TFP is WRONG by TheRaven64 · · Score: 2, Interesting
      The only reason that x86 is still around is, that it is the only architecture Microsoft ever got their operating systems working on decently.

      Windows NT ran fine on PowerPC, Alpha, and (I believe) MIPS. The problem was the applications. Very few were ever ported to anything else, and most people wanted to run legacy DOS applications. If you had an Alpha, you could run x86 applications using DEC's FX32! to emulate it, but that somewhat defeated the point of using a fast chip.

      --
      I am TheRaven on Soylent News
    2. Re:TFP is WRONG by Ilgaz · · Score: 2, Informative

      If we are speaking about POWER family (not PowerPC) Opteron is very "simple" compared to Power5 or soon to be released Power6 family.

      It seems Wiki's enterprise/CPU sections got rid of CPU fanboys,zeaolots (both CISC and RISC) lately and could be trusted for neutral information regarding these stuff.

      As a quad G5 owner thanks to Apple move to Intel, like-a-joke non serious claims like "5x faster than G5!" and entire Apple fanboy base becoming Intel fanatics, I felt forced to get all the information which I normally wouldn't care about.

      XBox 360 is running a specialised yet Power based CPU having 3 cores for example. PS3 has a very strange CPU which is also specially designed for gaming and entertainment purposes. Still, based on Power.

      Based on Wiki, a typical car owner may have purchased 8 or more Power embedded processors along with the car.

      Well, you (or anyone got tired of PPC is dead stupidness) should read/reference this page:
      http://en.wikipedia.org/wiki/PowerPC

      and here are the reasons why CISC is still relevant while RISC exists:
      http://en.wikipedia.org/wiki/RISC#Later_RISC

      also if you own a Power based anything (including Mac) http://www.power.org/ (Official site of Arch board)

      I am ordinary end user just happen to like PowerPC/RISC platform for my computing needs and I spared my time, pricey data (Opera Mini+GPRS) to read those articles last night. Funny co-incidence that same time a person who has connection to "NY Times" brand was writing such BS article about how Freescale effected by Apple gave up G4.

      Lets give a clue: Apple was the smallest customer of FreeScale semiconductor powerpc based CPUs. Unbelievable but true. That is why they (and IBM,recently hating/got rid of end user customers) didn't CARE about Apple move.

      "Freescale CEO Michel Mayer said in an email to employees that he was disappointed, but noted that the company's Mac business accounts for less than three per cent of total revenue.

      'It is increasingly clear that the center of technology innovation is moving away from the personal computer,' he added. "

      Yes, 3%!

      I started to wonder if Apple gave PowerPC or PowerPC vendors gave up Apple.

    3. Re:TFP is WRONG by ooze · · Score: 2, Interesting

      I don't know whwther you have read this review and benchmark comparison of the Old and the new PowerMac/MacPro.

      See, on one side we have the 3 years old Dual Single-Core G5 with 2,5GHz. On the other side we have the newest Dual DualCore Xeon with 2,66GHz. That is 3 years advance in technology and manufactoring process (even a geberation generation difference, the G5 is 90nm and the Xeon is 65nm), double the cores cores and a neglectable 1% advantage in Clock. Yet the speed advanatge barely scratches 50% in it's best tests, most of the time the advantage is only between 20% and 30%. And for benovelence they haven't even mentioned Performance/Watt. For comparison, this is somewhat like comparing a dual Pentium to a single i486 and only barely beating it. So why is that? It's the architecture. Those are the things the average user can see when he looks carefully.
      The other thing is all the quircs and limitations (to name only a few: real mode, A20 gate, no execute flage etc, awkward paging mechanism, crufted, "baroque" instruction set) that an engineer has to work around to get it to work. That isn't immediately noticable to the end user. But what the end user notices is more glitches and unpredictable problems which are the results of not so clean designs. I'm only guessing, but I sort of have the impression that the well documented, but unheard of before problems with instability and and random shutdowns etc. are a result design not being so clean and managable as before.

      --
      Just because I can imagine doing a hippopotamus, doesn't mean I'd like to do it.
  3. Re:Leveraged Buyout by Ancient_Hacker · · Score: 3, Insightful
    A leveraged buyout is where one group of idiots with the gift of gab convinces another group of idiots with more money than sense, that the first group can better manage a company currently being run by a third group of idiots.

    It's particularly silly in this case, as Motorola/Freescale has been often held up (perhaps even partially correctly) as an example of really good management. It's hard to stay in business for 50+ years with bad management.

    The ideal case would be where the company *is* being run by clueless types. Or managers that emphasize long-term results versus quick cashouts. In those cases the blabby idiotsd can run the company into the ground and get lots of cash for a few years at least until all the cash cows have been milked dry.

  4. Re:With Intel and AMD rolling out the DRM by ooze · · Score: 2, Interesting

    I just hope this takeover won't hurt them in thier technology decisions. Because I want to see a Subnotebook with their MPC8641D their MRAM as a buffer and about 10-20GB Flash. Combined with an organic iode display or a high resolution monochrome titanium-oxide screen and a decent battery that would be the ultimate outdoor writing and coding machine. The only thing it won't be overly suited for is video and high end gaming, but still should be enough for most. A laptop with days of battery time ...

    --
    Just because I can imagine doing a hippopotamus, doesn't mean I'd like to do it.
  5. Possibly ungood by Anonymous Coward · · Score: 5, Informative

    http://en.wikipedia.org/wiki/Leveraged_buyout
    The Wiki article on leveraged buyouts is pretty neutral. You have to read between the lines.

    From the Wiki article: "Proponents of LBOs claimed that they caused companies to make more efficient use of their resources." That means that you don't want to be the victim of a leveraged buyout and have to defend yourself against it. If you haven't made efficient use of your resources (ie. your assets are worth more than your stock) you could become the victim of corporate raiders. http://en.wikipedia.org/wiki/Corporate_raid They sell off your assets and your company ceases to exist.

    In the nastiest kind of leveraged buyout, the buyers essentially use the company's own money to buy it.

    Let's see if Freescale tries to defend itself with a poison pill. http://en.wikipedia.org/wiki/Poison_pill

    Geez, this investment stuff is almost as much fun as reading Groklaw.

  6. Re:Leveraged Buyout by Mr+Z · · Score: 2, Informative

    Motorola/Freescale held up as an example of good management? Maybe other divisions of Motorola, but even then I'm not so sure. As I recall, what became Freescale almost never made a profit when it was Motorola Semiconductor, and just ended up being a training ground for other companies. MSPS just liked to bleed money. That was true even before the tech bubble burst.

    I won't comment on Freescale as my employer competes directly with them. I don't mind commenting on old news though.

    --Joe
    --
    Program Intellivision!