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Who are the likely buyers of Jazz?

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

Keywords:pure-play foundry? WLAN? Jazz specialty fab?

Jazz Technologies Inc., which is on the block, has yet to announce a buyer.

Earlier this year, specialty foundry Jazz said that it had initiated a review of its ''strategic alternatives to enhance stockholder value.'' In other words, Jazz is up for sale.

During a conference call May 7, the specialty foundry company declined to comment on discussions with potential suitors. The company also reported another loss for the quarter.

In order, here's my predictions which company might buy Jazz:

1. X-Fab Semiconductor Foundries AG - German foundry vendor has been on an acquisition spree. Both X-Fab and Jazz are going after the same mixed-signal and analog customers.

2. Vanguard International Semiconductor Corp. - Backed by Taiwan Semiconductor Manufacturing Co. Ltd, Taiwan foundry Vanguard would love to garner more capacity in the mixed-signal space.

3. On Semiconductor Corp. - Strange idea, but there are rumors.

4. Chartered Semiconductor Manufacturing Pte Ltd - Singaporean foundry would love more capacity, but a U.S. acquisition presents a major risk.

5. Others in the running? ASMC, HHNEC, IBM.

Who is Jazz?
Jazz, a pure-play foundry that spun out of Conexant Systems Inc. several years ago, specializes in RF and mixed-signal fabrication, using CMOS, BiCMOS and SiGe BiCMOS processes.

Over the years, the company has struggled to become profitable. It is also looking for a new fab to boost its capacity.

Jazz has already been acquired once. In 2006, Acquicor Technology Inc., a ''blank check'' equity firm run by three former executives from Apple Computer Inc., acquired specialty foundry provider Jazz for $260 million in cash.

The equity firm was recently formed by several industry veterans from Apple and other companies, including Gilbert Amelio and Steve Wozniak. Amelio is chairman and CEO of Jazz. Wozniak is no longer with Jazz.

In the conference call, Amelio said there was a slowdown in demand in the quarter. Q1 08 revenues were $50.8 million, compared to $22.5 million a year ago. Q4 07 revenues were $54.8 million.

Q1 net loss was $4 million, or minus $0.22 per share, as compared to net loss of $4.5 million, or minus $0.22 per share in Q4 07. First quarter GAAP net loss was $11.7 million a year ago.

Net loss in Q1 2008 and Q4 07 included the impact of a $0.8 million and a $1.9 million net gain, respectively, relating to the purchase of a portion of Jazz Technologies' convertible senior notes at a discount to their principal amount.

Utilization backlog
Capacity utilization was approximately 88 percent during Q1 08 as compared to approximately 93 percent during Q4 07. Jazz Technologies estimates Q3 08 capacity utilization will be approximately 67 percent.

''Based on our backlog and utilization metrics, we expect second quarter 2008 sales in the range of $45 million to $47 million. The lower revenue reflects initial indications from major customers of inventory build-up in select markets, particularly handset and WLAN. Despite lower revenue, we expect Q2 EBITDA and free cash flow again to be positive,'' said Paul Pittman, chief financial and administrative officer of Jazz Technologies, in a statement.

- Mark LaPedus
EE Times

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