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Mayer to step down as Freescale CEO

Posted: 12 Feb 2008 ?? ?Print Version ?Bookmark and Share

Keywords:Freescale CEO? semiconductor? chipmaker?

Freescale's Mayer will continue in his current role as CEO until a successor has been identified and will remain chairman of the board until the transition is effective.

Freescale Semiconductor Inc. has announced that Michel Mayer has decided to step down as the company's chairman and CEO.

The question is whether Mayer was ousted amid ongoing losses and problems at the chipmaker. Some also wonder if the sudden move portends other changes at Freescale, including the breakup of the company or a move to find a suitor.

Meanwhile, Freescale and its board of directors have initiated a search for a new CEO. Mayer will continue in his current role until a successor has been identified and will remain chairman of the board until the transition is effective.

Mayer joined Freescale in 2004 and led the company through its transition from a semiconductor division of Motorola Inc. to a public company following an initial public offering in July of 2004. In December 2006, Freescale became the largest leveraged buyout in the history of the technology industry.

Roller-coaster journey
Needless to say, it's been a roller-coaster ride at Freescale. Over the years, Motorola's former and troubled chip unit generally struggled and lost money. But as an independent company prior to the buyout, Freescale somewhat turned the corner and generated profits, thanks in part to its strong networking, automotive and wireless lines.

Then, in September of 2006, Freescale entered into a definitive merger agreement to be acquired by a private equity consortium in a transaction with a total equity value of $17.6 billion. The consortium is led by The Blackstone Group, and includes The Carlyle Group, Permira Funds and Texas Pacific Group.

Stockholders of Freescale Semiconductor in November of 2006 approved the previously-announced acquisition of Freescale by a consortium of private equity firms.

Since it went private, Freescale has struggled and lost huge sums of money. Some wonder if the private-equity experiment failed. But in reality, the company lost money, due in part to the wireless troubles at one customer: Motorola Inc. Freescale sells its wireless chips and other products to Motorola. (Ironically, Motorola's CEO was recently replaced.)

"For Freescale, it's a challenging time," said Ray Bingham, managing director with General Atlantic LLC, a global growth equity firm, in a recent panel. Bingham is a former board member of Freescale. He also sits on the board of STMicroelectronics and other firms

In the red
Recently, Freescale moved to expand its business. This month, Freescale said it has agreed to purchase SigmaTel Inc. for about $110 million to secure complementary analog ICs as it diversifies sales into the digital and consumer electronics markets.

Over time, though, some observers look for a breakup of Freescale in an effort to salvage the company. Infineon Technologies AG could buy some or all of Freescale, observers speculated. NXP Semiconductors or STMicroelectronics Inc. may buy some of the pieces of Freescale, observers speculated.

In 2007, Freescale lost $1.61 billion on sales of $5.72 billion. This compares to a loss of $1.99 billion on sales of $6.36 billion in 2006.

Freescale's net loss narrowed sharply in Q4 07 on a five-percentage point improvement in gross profit margins and the absence of special charges that hurt its financial performance in the year-ago period. The company reported a net loss of $525 million for the three months ended Dec. 31 compared with a net loss of $2.7 billion in Q4 06.

The year-ago quarter results included a hefty $2.26 billion charge for in-process research and development. Revenue in the latest quarter dropped to $1.54 billion from $1.62 billion in the comparable 2006 quarter.

- Mark LaPedus
EE Times

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