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I asked the panel if the fact that NXP and Freescale hadn’t grown since they were acquired by private equity in 2006 showed that the private equity model was a bad one for the semiconductor industry.
Rick Clemmer, CEO of NXP, replied: “Our Q3 was up 9% sequentially and 12% year on year.”
In fact NXP’s Q3 2012 revenue at $1.11 was down on its Q3 in 2006, the year it was bought by private equity company KKR of New York.
In 2006, NXP had revenues just short of $5bn. Ever since, the quarterly revenues have run at slightly less than 2006 – $1.06 bn in Q4 2009; $1.08bn in Q4 2010; $1.12bn in Q2 2011 and $1.11bn in Q3 2012.
So the company hasn’t grown at all in six years of being owned by private equity.
Gregg Lowe, CEO of Freescale, which also hasn’t grown since being acquired by Blackstone in 2006 while being congenitally loss-making, pointed out that one of the benefits private equity brings to the semiconductor industry is focus – focusing on doing things which the company is good at.
Recently Freescale announced it it would take a $35-40m charge to sack more employees. The number of jobs to be lost would be not more than 5% of the total workforce said Lowe.
NXP and Freescale, which were top ten companies in 2006 when private equity acquired them, have now sunk to No. 17 and 19 respectively in the world rankings, according to IC Insights.
I shall wear it with pride, The Baron, much appreciated
“Worth asking the question though, I thought”
Indeed, and you get “Baron’s Gold Star”(*) this month for having the balls to make the needed waves!
The Baron
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* Ingredients: gold substitute 99%, preservatives 1%
Yes they’re both undergoing even more job cuts as we speak, non, after 6 years of private equity ownership to be still cutting jobs shows a massive failure of the PE management approach. The best thing to happen would be if some company took a controlling stake after a full float and decided that it was worth investing again in the company. Unless and until that happens it looks as if it will continue tobe more of the same – cuts, cuts cuts.
These two companies are ready to flog the rest off in the next 12 months. Do you not think it will be worst when they are full floated on the market?
I’m sure you’re absolutely right, Bitter, neither Clemmer nor Lowe seemed to relish the opportunity of a prolonged defence of their employers. Perhaps because no defence exists.
yes anon, but the rationale to selling businesses is to use the resources to invest in better performing areas – something which has clearly not been accomplished in the case of nxp and freescale.
Absolutely, anonymous, focussing in the private equity sense means cutting and cutting and cutting in the hope that the numbers will work one day. It’s a euphemism for shrinking which is what Freescale has been doing since 2006
I was lucky to get to ask the question, The Baron, only 3 questios were allowed in a one hour forum of which one question was an ST plant. It’s interesting that no one made a rational defence of private equity – in fact there isn’t one in the case of NXP and Freescale which have sacked tens of thusands of lpeople only to stand still in terms of revenue and profits. Everyone knows it has been a disaster but, of course, CEOs of PE companies can’t admit that and expect to stay employed. Worth asking the question though, I thought.
You’re right, Martijn, there was an hour allotted to the discussion on the smart grid. 50 mins were takien up wtih CEOs talking about the smartgrid. Then questions were asked for and there was a planted question from ST’s Carmelo Papa which took five minutes. Then another question and then mine, which was the last question allowed. Only Clemmer and Lowe of thefour panellists answered and they seemed to want tokeep it brief. I can understand why!
“In fact NXP’s Q3 2012 revenue at $1.11 was down on its Q3 in 2006, the year it was bought by private equity company KKR of New York.”
“In 2006, NXP had revenues just short of $5bn. Ever since, the quarterly revenues have run at slightly less than 2006 – $1.06 bn in Q4 2009; $1.08bn in Q4 2010; $1.12bn in Q2 2011 and $1.11bn in Q3 2012.”
“NXP and Freescale, which were top ten companies in 2006 when private equity acquired them, have now sunk to No. 17 and 19 respectively in the world rankings, according to IC Insights.”
I hope you pointed this out to them after they answered and left it open for them to comment (or just stay silent like politicians and other shysters do when cornered). This is exactly the sort of charges PE should answer but that people are usually “too polite” to raise when given the chance.
I don’t see much “defense” in the article, was this all?
Guess you were cut short since it wasn’t the topic of the discussion?
Perhaps “focusing on doing things which the company is good at” means sacking employees, withering away to bankruptcy, and paying their CEOs far too much.
Well NXP did sell off the Mobile & Personal and Home BU’s, so if it’s still close to 2006 revenues with its shrunk-down operation, that could be seen as focused growth I guess…
Inside Rick Clemmer’s & Gregg Lowe’s heads while spouting CEO PE BS must have been along the lines of: “FU David and Roll on my $25 mill”.