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Freescale CEO stays optimistic despite Q2 loss

Posted: 27 Jul 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Freescale loss? microcontroller? automotive?

Freescale Semiconductor posted a net loss of $484 million on revenue of $824 million for the quarter ended July 3, but CEO Rich Beyer said the firm continues to make solid progress on its ongoing restructuring and goal of returning to sustainable profitability.

Company chairman and CEO, Beyer said he was pleased with the firm's performance in Q2, touting sequential product revenue growth of 3 percent, reduction of inventory and a smaller adjusted operating loss. Beyer said Freescale has "seen a stabilization of the business" and expects sales to increase by a "low-to-mid" single-digit percentage in the third quarter.

"This transformation we are going through is positive," Beyer said.

The net income of $484 million compares to a Q1 net income of $1.8 billion, which was achieved through a $2.3 billion gain on the elimination of a portion of its long-term debt, and a net loss of $184 million in Q2 08.

Freescale reported Q2 loss from operations of $345 million, including $82 million in reorganization costs, compared to a loss of $351 million in the first quarter of 2009 and a loss of $137 million in the second quarter of 2008.

The adjusted operating loss, excluding charges, was $75 million, Freescale said, compared to $140 million in Q1. The company reported an adjusted operating income of $234 million in Q2 08.

Second quarter net sales declined to $824, Freescale said, down 2 percent from Q1 and down 44 percent from the same period of 2008. Freescale attributed the y-on-y sales decline primarily to its 2008 decision to exit the cellular chips business, as well as a decline in sales to the automotive industry.

Auto woes, MCU drop
Beyer said the collapse of the North American automotive industry has hurt Freescale's microcontroller sales, which declined to $238 million in Q2, down 3 percent sequentially and 48 percent y-on-y. Beyer said North American automotive productions appears to be improving, but that it would be a long time before the company's microcontroller revenue from the automotive industry might return to year-ago levels.

Freescale holds market share among automakers in other parts of the world, Beyer said, but it is not enough to make up for the dramatic decline in North American production caused by the collapse of the U.S. automakers.

Beyer attributed the sequential revenue decline in intellectual property licensing revenue, which he said tends to be lumpy. Freescale had particularly strong first quarter revenue from licensing its technology to competitors, Beyer said, which the company did not expect to repeat in Q2.

Freescale last year said it planned to sell its wireless handset chip set business to focus on core markets. But unable to find a buyer, Freescale said in January it planned to unload the unit piecemeal.

Beyer said Freescale sold a very small part of its wireless chip business to Fujitsu Microelectronics, but that most of the resources associated with it have been let go. Speculation earlier this year that the company was close to a deal to sell all or part of its cellular products group to a Chinese firm was inaccurate, though there were some discussions, Beyer said. Freescale continues to look for opportunities to monetize the assets, he said.

Beyer said Freescale continues to gain key design wins, something that he maintains will pay dividends for the company down the road. He gave examples to two Q2 design wins: a key base station socket at a wireless infrastructure company with its new six-core DSP and also snagged a highly competitive win in body control platforms at an automobile manufacturing.

"The markets we serve have a very long gestation period," Beyer said. "Success doesn't immediately show up in the numbers."

Adjusted gross margins for the second quarter were 31 percent, up from 28 percent in the first quarter, but down from 47 percent in the same period of 2008, Freescale said.

- Dylan McGrath
EE Times

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